Why Students (and Barack Obama) Should Shut Up Already About College Costs

Note: This originally appeared at The Daily Beast on September 3, 2013. Click here to read the original.

It’s back-to-college time, which means it’s the season for bitching and moaning about rising college costs, lack of access to higher education, and the pressing need for even more taxpayer-funded subsidies to the leaders of tomorrow. In just the past few weeks, we’ve been subjected to breathless reports that “college tuition costs” have risen 500 percent since 1985 and a mini campaign swing by President Obama touting more free money for students and a federally sanctioned knockoff of college guides already provided by the Princeton Review, U.S. News & World ReportWashington MonthlyBarron’s, and countless other sources.

Enough already. The plain facts are that college is still well within reach of most Americans, the wage premium for a college sheepskin remains huge, and student loans are not a new form of indentured servitude. You wouldn’t get any of that from grandstanding politicians always looking for a new way to rob Peter to buy Paul’s vote, an educational establishment that’s always on the hunt for new revenue sources, and a news media that alternates between the credulity and ignorance of, well, a first-semester freshman.

According to the latest figures from the National Center for Education Statistics (NCES), total tuition, fees, room, and board at four-year colleges for the 2011–12 academic year came to $23,066 on average. For state schools, the cost was substantially less (about $16,000 per year), and for private schools, it was substantially more (about $34,000 per year). In inflation-adjusted dollars (as opposed to the unadjusted figures favored by alarmists), that’s about twice as much as costs were in 1985. As a recent New York Times headline put it, “College Costs: Rising, Yet Often Exaggerated.”

Rising costs (and we’ll get to reasons for those in a moment) haven’t deterred people from going to college. About 68 percent of high school seniors enroll in two- or four-year higher education right after they graduate, a percentage that has stayed at or near historic highs for the past decade. (In 1985, by comparison, just 58 percent enrolled.) If college were being priced out of the reach of most Americans, that percentage would surely be cratering, especially in the depths of the Great Recession.

Coming up with $23,000 a year for a conventional residential college is a lot of money, but the sticker price is routinely offset by various grants and other forms of aid (as in everything else, only suckers pay retail). There’s also a good reason why so many people go on for more schooling. Depending on your assumptions, a college degree generally increases lifetime earnings between $280,000 and $1 million. According to NCES, full-time, annual median earnings for college grads between 25 and 34 are about $15,000 per year more than they are for high school grads.

As important, college grads at every stage of their careers are far less likely to be unemployed than nongrads. Recent grads are about 2 percentage points less likely to be unemployed than the typical worker, and older college grads are half as likely to be unemployed as those with a high school diploma.

There’s been a lot of hand-wringing over whether today’s grads are overqualified for the jobs they do take. Ohio University economist and higher-ed curmudgeon Richard Vedder is always quick to point out that there are “115,520 janitors in the United States with bachelor’s degrees or more.” But as researchers at the New York Federal Reserve Bank have pointed out, the 1980s and ’90s saw similar levels of underemployment of recent grads. (My first job when I graduated from college in 1985 was pumping gas; six months later, I started my first full-time journalism gig.) Despite some delays caused by the rotten economy, there’s every reason to believe that college grads will continue to filter into jobs that are higher paying and more in line with their interests, skills, and abilities.

That’s good news for students who take out federally subsidized loans to pay for postsecondary education. Few aid programs come in for as much abuse as federal student loans, which, despite lower-than-market-level interest rates and longer-than-typical payback periods, are routinely castigated as rip-offs that push students into economic despair and neo-serfdom. That’s simply not true. For starters, just 35 percent of high school grads going on to two- or four-year institutions take out any loans (public or private) out in a given year. That’s according to Sallie Mae, the agency that oversees the federal loan program.

If you focus on students attending four-year colleges, that number goes up to 52 percent at public schools and 64 percent at private, nonprofit colleges. Of those who borrow to finance their education, they typically owe $26,000 upon graduation. At annual interest rates of 3.9 percent (the amount charged for federal loans originated this year), that means a monthly payment of $262 over the 10-year repayment period. (Go here for a loan calculator.) If you can avoid taking out loans, more power to you, but given how much more money a B.A. gets you over time, it’s actually a very good deal. And it’s totally right that the person getting most of the benefit shoulder a good chunk (if not all) of the cost, isn’t it?

Far from creating “a new caste system,” as the New America Foundation would have it, the country’s colleges and universities are somehow managing to turn out more and more graduates as a percentage of the population. In 2012 34 percent of Americans ages 25 to 29 had a bachelor’s degree or more. That compares to 25 percent in 1995.

None of this is to deny that some people get overwhelmed by student debt, often because they choose ridiculously expensive private schools that provide no boost in earnings for most students. And about 45 percent of students who start college aren’t finished after six years, either because they lose interest or are ultimately not capable of doing college-level work. Neither of those outcomes constitutes anything like a crisis or a scandal requiring a complete overhaul of a system that is serving students extremely well.

If anything, the tough questions about our college system lie mostly on the taxpayer side of the equation. As Ohio University’s Vedder notes, the public money being spent to subsidize college is vast and growing. In 1999–2000, total federal, state, and local appropriations, grants, and contracts came to $7,000 per student (in 2010 dollars). In 2009–10 that figure came to $7,942 (in 2010 dollars) (see Table 370). The federal government is guaranteeing more than $1 trillion in student loans, and Pell Grants have increased in size and scope. (Eighteen percent of families making between $60,000 and $80,000 get them, compared with just 2 percent in 2007.) All that free and reduced-price money is one of the main reasons why the main reasons college costs outpace the general rate of inflation—what some have properly identified as a higher-education bubble. Far from making college more affordable, increasing subsidies to students—whether in the form of larger grants or bigger loans at low, low rates—allows colleges to raise prices with near impunity.

How to slow the growth of college costs while maintaining access and intellectual standards is no easy task, to be sure. While it may be in the best interest of President Obama to spread more money around, of college administrators to vacuum it up, and of students to carp about rising costs, that shouldn’t be confused with the public good.

Correction: The original version of this article incorrectly identified Sallie Mae as a federal agency.

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  • Drake||

    Did I imagine reading this article a few days ago?

  • Nazdrakke||

    Anything Nick G writes for the daily beast has to appear at least three times on HnR, by law, I believe.

  • ||

    It's part of the publishing agreement most of the Reason writers have at other sites. Stuff they post at another site gets to sit there exclusively for a few days, then they're allowed to post it back here at Reason. Before that, the most they can do is link to it.

  • Pariah30||

    We should just shut up?

  • JWatts||

    Nope, you shouldn't have to shut up. Granted, most everyone else is going to ignore you, but it's your 'Merican right to whine about it.

  • Carnival||

    Nope, sorry. Normally I'm a fan of Mr. Gillespi, but he should keep his mouth shut on this issue.

    I'm in college now, as are most of the people in my life right now, and college HAS gotten prohibitively expensive for a lot of people, and I see graduates come back all the time saying that there are no jobs out there.

    Most of us (even those who hate it) are cramming into a few majors we know lead to job security (government, business, mathematics, comp. science etc.), but that's just over-saturating the market.

    Should the government come in and fix it? That implies they can 'fix' anything (which is doubtful at best), but telling college students to shut up, sit down and that everything is actually okay (despite the crushing student debt we've all got) is stupid.

  • WTF||

    despite the crushing student debt we've all got

    And who made that decision to take on all of that debt?

  • Floridian||

    To be fair certain majors are lock step so you have the follow the track. It makes it difficult to impossible to work while attaining these degrees. For my graduate degree I had to take on over 100,000 in debt but I make six figures now so I don't really complain about the debt. However this is a barrier cost to entry for other fields that may not pay as well.

  • wareagle||

    100K for a grad degree? What field if I may ask? That sounds like med school tuition.

  • Floridian||

    I'm a nurse anesthetist. The cost includes 92 credit hours of graduate study, books, equipment, lab fees, and my cost of living for 28 months. I went to a public university so I saved some money there.

  • wareagle||

    okay...I was leaning toward medical given the cost. Best of luck in your career.

  • Floridian||

    Thank you. Same to you.

  • ||

    Exactly. I'm just openly musing here but as a general rule - I think - people KNOW education is expensive in the USA. And 'expensive' really is all relative. You can have low tuition like here in Canada but in most cases you get what you pay for.

    Seems to me, you should start saving some coin BEFORE going to school which implies needing to know whether you plan to go early in your life - which isn't easy.

    Once decided, it takes discipline to save money.

    Bah. I live a 'privileged' life apparently according to the left for daring to do the most basic of things: Plan and save money.

    Or if you don't have it, if you think education will pay off diligently and honorably pay off your debt. Take a crappy job. Whatever. If you feel the trade-off is risky, then take on a trade.

    Life is but about debt and margins. I pay myself a modest salary in order to pay off my $200 000 business debt - and lemme tell ya, the government doesn't make it easier on us either.

  • Carnival||

    It's practically impossible to find employment as a young person in this economy without a four year degree. Even with one, it's still rough.

    I'm going to a public school, got lots of scholarship money, and am trying to major both mathematics and pharmacology: I'm no slouch and there are people making much worse choices, but even with two majors with pretty good job prospects (pharmacology + grad school could be any number of things, and everyone wants math majors), I still carry massive anxiety about my future.

    In the meantime, as a student with only a high school diploma and the need to work around class schedules, it is almost impossible to find a job that's hiring, so graduating loan free is difficult, let alone having some extra money for day-to-day life.

    Despite the fact that I have taken numerous calc courses, linear algebra, and number theory, I was turned away from fucking REI because I 'wasn't qualified' to be a cashier.

  • Libertarian Barbarian||

    Don't sell yourself short Judge, you're a tremendous slouch

  • wareagle||

    WHY is college expensive? There is your question. If you got to a public institution, govt is already involved and IT is the problem. Since the student loan program will loan whatever amount a school wants to charge, there is incentive to hold costs down. And so, tuition rises by 8-10% a year.

    Where does the money go? Look around you at physical plants that resemble country clubs, money spent on creature comforts for students instead of instruction, the battalion of GTA's and instructors needed to teach since that seems beneath the typical tenured prof, and the vast bureaucracy on every campus.

  • JWatts||

    The biggest difference is in additional administrative staff. College staffs have become bloated with middle management.

  • Victor8969||

    Did you mean there ISN'T any incentive to hold costs down?

    I agree with this 100 percent. The higher education system is a business.

  • d_remington||

    Closer to a boondoggle, I'd think.

  • MoreFreedom||

    Higher ed is a business, though competitors find it difficult to get accredited by government, to get approval and authorization to get the same handouts existing schools get, schools can't hire/fire professors at will, and where its customers find it easy to borrow money (government guaranteed) to obtain their service.

    So except for those government favors to higher ed, it's like a business.

  • effinayright||

    A few private colleges have failed, but no public ones AFAIK, so there's not much of a case to be made that the latter are "businesses".

    As long as public colleges can squeeze more money out of students, parents and their state legislatures, they can hire and spend as much as they want.

  • kinnath||

    despite the crushing student debt we've all got

    Don't borrow money you don't know how to pay back. If you can't figure that out, you don't belong in college.

  • MoreFreedom||

    Gillespie acknowledges that college is overly expensive, and that there aren't many jobs out there.

    What Gillespie is saying, is he's tired of hearing people argue for government handouts because of the high cost of education, or for any other government handout for that matter. Especially when the costs are high because of government.

    For another example, look at Obamacare. It turns out the costs are much higher (contrary to what Obama says - random thought: perhaps a better gauge of truth is the opposite of what Obama says), so all sorts are asking for exemptions (a government favor). And the latest is that we're supposed to lie to get our insurance subsidized by government. Somehow, I think they plan to prosecute them later.

  • Hugh Akston||

    Don't be so heartless, Nick. The people who cry today about how unaffordable college is are the people who will cry tomorrow about how unaffordable home ownership is, and someday they will be the people who cry about how expensive it is to raise kids.

    These folks are entitled to a middle class lifestyle and all the government subsidies that come along with it. Denying them their kvetching about how other people don't support them enough is exactly the same as sending them to gas chambers.

  • Floridian||

    But I complain about cost of taxation because the government is corrupt and wasteful. If college kids are complaining that education is unnecessarily expenive due to government subsidizing loans allowing tuition to increase, isn't that a valid point?

  • Certified Public Asskicker||

    No, STFU.

    -The Jacket

  • Fatty Bolger||

    This article, while not wrong, is ass-backwards. The last couple of paragraphs is the whole point. Don't blow smoke up my ass and try to tell me that college isn't overpriced and overvalued. It is. The real issue is why, and what can be done about it? Gillespie nails it at the end, but most of the article is a bad argument trying to head off worse policy (more loans, student loan forgiveness, etc.).

  • Eric||

    Government solutions to college costs do nothing but propogate the issue....and that is that a college degree has become similar to a high school degree used to be: A prerequisite within the career path for most white collar workers.

    A great solution could be pushed by the business community, and that would be to reevaluate which jobs really need a college degree vs a technical degree, or simply just old fashioned OJT. For example, does a Network Administrator, or DBA really need a four year academic degree to do his/her job? HR in most companies would say so, but this type of job really only requires a two year technical degree at most. Same goes for most of today's white collar jobs. Further, more than half of a four year degree is simply repeating what you should have learned in high-school: English, Math, Social Studies, Science, etc...The solution is not simply throwing more money at a broken system.

  • Cdr Lytton||

    A great solution could be pushed by the business community, and that would be to reevaluate which jobs really need a college degree vs a technical degree, or simply just old fashioned OJT.

    And why would companies want to do that? It's completely rational to want to hire a fully trained employee out of the gate rather than hiring one who needs to be trained on the company's dime.

    Besides, a degree or any other "requirement", is also a rough tool to weed out applicants down to a more manageable number.

  • AlexInCT||

    "And why would companies want to do that? It's completely rational to want to hire a fully trained employee out of the gate rather than hiring one who needs to be trained on the company's dime."

    Especially in this day and age where the freshly trained employee can walk away to a better paying job elsewhere. now don't get me wrong. I believe that probem was caused by companies destroying the incentive to be an employee for life themselves, but it is a reality we can not ignore.

  • MoreFreedom||

    "I believe that probem was caused by companies destroying the incentive to be an employee for life"

    I don't believe companies changed the incentives to stay working for them, and instead employees started believing that changing jobs led to better jobs and better pay. Certainly it's got to be true for some workers in some jobs.

    On the other hand, I've been working for my company for over 25 years, since I believe I've got a reasonably good job with reasonably good pay.

  • Eric||

    The vast majority of academic college degrees do not "train" you to do anything. Instead you take 2 years of general studies, and then 2 years of upper division courses related to your major. But you are right that a degree is used instead as a way to separate the wheat from the chaff. But this is an imperfect method, since academic skills don't always transfer to the real world.

  • AlexInCT||

    "Further, more than half of a four year degree is simply repeating what you should have learned in high-school: English, Math, Social Studies, Science, etc..."

    That's precisely why so many employers now require that college degree: a high school diploma is usually worthless, and the majority of high school grads are woefully unprepared and don't even know it.

  • Eric||

    Right. But propogating the "Pay your fee and get your B" atmosphere of the modern college experience is the wrong way to continue. I find as many idiots who are college eductated as not in my daily interactions.

  • AlexInCT||

    Agree sir. Some of the most idiotic & stupid shit I have had to content with came from people with college degrees. It seemed to make them immune to logic and to the possibility they were wrong.

  • Ron||

    The solution to expensive schools is more schools. Most schools have to turn away students so it's obvious that the price is a market problem. The other solution is to allow more students per school which would lower fees but unfortunately California never studied economics so it lowered the number of students it would allow and then raised the price due to lack of funds.

  • ||

    $23,000 for tuition, room & board, fees, and supplies? Jesus Christ, what state school is that?

    Also, it's easy to bitch about the students and late 20-early 30 somethings complaining about tuition and loans being prohibitive when you're old enough to have graduated from college when companies were throwing jobs at graduates.

    Of course, as always, the solution is to get the government out of the way in the higher education (sic) system and getting rid of retarded licensing requirements.

  • thom||

    Also, it's easy to bitch about the students and late 20-early 30 somethings complaining about tuition and loans being prohibitive when you're old enough to have graduated from college when companies were throwing jobs at graduates.

    When was this? I'm in my early-mid 30's and when I graduated companies were not throwing jobs at graduates.

  • ||

    That sentence may have been a little clunky. I was saying that people that graduated in the late 80's and 90's had jobs thrown at them (40 y/o's). People that graduated from 2000 to now (20's and 30's) are the one's complaining about the cost.

  • JWatts||

    You can say that, but at least in my field, engineering, quite a chunk of the graduates we've interviewed in the last 5 to 10 years are resistant to the job demands.

    We average 45-50 hours, junior engineers are expected to average 45 hours and seniors 50 hours. We travel up to 1/3rd of the year and we work in factories that are generally in the middle of nowhere and a lot of the work is on the factory floor. We don't have a lot of paid holiday's (9) and vacation is limited to two weeks for your first 5 years.

    The demands of the job haven't changed, but the graduates are more apt to say that the salary is fine, but they don't want to work that much. Granted, in the last 5 years, since the job market got tougher, we don't get nearly as much resistance.

  • The Late P Brooks||

    Price goes up.

    Quality goes down.

    Taah daaaah.

  • ||

    "According to the latest figures from the National Center for Education Statistics (NCES), total tuition, fees, room, and board at four-year colleges for the 2011–12 academic year came to $23,066 on average. For state schools, the cost was substantially less (about $16,000 per year), and for private schools, it was substantially more (about $34,000 per year)."

    Could someone explain to me the difference between "four-year colleges," "state schools" and "private?" Are these all "universities?"

  • Virginian||

    State schools are subsidized by taxpayers, private schools are not.

    Four year colleges is a term of art, distinguishing tech schools and the like from "real" colleges.

  • ||

    Thank you, sir.

    Sounds like tech schools can be useful.

  • mr simple||

    Damn my slow reading and typing!

  • Death Rock and Skull||

    "private schools are not [subsidized]"

    Bullshit.

  • mr simple||

    I think four-year colleges are the aggregate of state and private schools that are not technical schools or associates degree only schools.

  • ||

    I'm assuming that "four-year colleges" are like University of Texas and "private" are like Rice. Not sure what the difference between a state school and a four-year are.

  • JWatts||

    A state school can be two or four year. A community college that offers associate degrees (obtainable in two years) is a two year school. A university that offers bachelor degrees (obtainable in four years) is a four year school. Oddly enough, masters and PhD's usually take 5-8 years, but their usually still acquired from "four year schools".

  • AlexInCT||

    The best way to address the out of control cost of a college education is to end the government subsidy program and/or to hold colleges accountable for the loans they give out. Colleges have no incentive to really vet the applicant and verify they can handle the loan amount they are getting, so they throw money around with minimal criteria met. If they however had a financial stake in that loan being repaid, I guarantee you that practice would end. Only qualified people would get loans, and then, loans to study for degrees that will allow employment that will get those loans paid back. Of course, that would be the end of most, if not all, of the “studies” type programs and the bulk of the humanities programs too, unless they drastically alter the costs of getting those degrees.

    Just like people would pay $60K for a luxury car but not for a clunker, college degrees, not based on the institution but the type of degree and the prospective for earnings tied to that degree, should come with different prices. Charging someone $25-50K a year so they can get a job that barely pays them $25-35K a year, if they can get a job even, is a crime, and we need to end that practice. This myth that all you have to do is attend college to earn more during your lifetime needs to come with the same list of warnings we force drug manufacturers to put on their products regarding the side effects.

  • hotsy totsy||

    My thoughts exactly, Alex.

  • JWatts||

    "Charging someone $25-50K a year so they can get a job that barely pays them $25-35K a year, if they can get a job even, is a crime, and we need to end that practice."

    Why is that a crime? Basically you want to hold universities responsible for the idiocy of their students.

  • AlexInCT||

    The student are idiots. No question there. But they are being told this is a good investment by these colleges, our government, and the progressives. If anything, we should be throwing these 3 under the bus for selling these dunce kinds and their parents this idiotic and obviously false dream.

  • AlexInCT||

    I should also point out that the left currently has no incentive to change the way colleges work or the cost of colleges. That’s because most degrees these days are nothing but indoctrination mills where the progressive PC shit the left believes in is hammered into the students skulls. This has been going on for decades and has gotten even worse. I still remember as an engineering major having to sit through some ludicrous marxist nonsense in both the humanities classes I was forced to take, and having vindictive teachers, on a professor the other a TA, both females, pissed at me for not wanting to swallow their tripe whole. I got even with the young TA, but just didn’t have the fortitude to bed that old crone.

  • Orange Crayons||

    There has been too much emphasis placed on going to a college or university and get a degree in fields that have become over saturated with applicants.
    Meanwhile, there are high paying jobs in trades that are clamoring for people. Carpentry, plumbing, etc.
    How many damn MBA majors do we need?

  • Jake W||

    It's all about making sure the *right* people attend college. Price everyone who isn't riding coattails or protected out. They know people can afford college, they don't like those people, you know the middle class.

  • PH2050||

    Comment from the Daily Beast "rebuttal":

    socialleper
    1 day ago
    @grinninglibber @DianaM70 Not everything Libertarian is bad. I like their honesty when it comes to backing off social issues. "To each their own." Its just a shame that they embrace a government model that is nearly anarchy. They, like Rand's acolytes, put "the market" on too high a platform and ignore the basic flaws in human character. They fail to see how some level of government is required to protect liberty from the "might makes right" instinct people have, regardless of whether that is physical or economic power."

    We need Derpetologist, STAT!

  • KRoyall||

    Ambitious, hard working people tend to be the ones who go to college. They are going to earn more than your average slacker regardless of their education.

    Any study on the payoff for college also needs to be based on recent data. A four year degree is no longer that unique hence it doesn't demand the same amount of money.

    Corporate America is now demanding that Congress allow them to import millions of foreign workers because apparently our college grads aren't good enough. This article is crap.

  • radical centrist blogger||

    pure nonsense. College is a ripoff, and the debt is neoslavery.

    The fact is that homo sapiens and especially younger homo sapiens are susceptible to propaganda due to man's evolved capacity to ingest and internalize ideas propagated from the top of society. The higher education cartel has created a skein of duplicitous propaganda based on lies and bogus statistics. This pro-education propaganda has become embedded in the popular culture where it ensnares the minds of impressionable youth.

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