Why College Costs Will Soon Plunge

The higher education bubble prepares to pop.

“My goal,” says the candidate, “is a healthier America. That is why I am setting an ambitious target of sending 1 million more Americans to the hospital in the next five years. To make sure they get there, I am announcing a new, low-interest loan program to help them pay for their treatment. This will ensure that hospital costs stay within reach of the typical American family.”

If you heard a speech like that, you probably would start scratching your head. Sure, people with acute medical conditions need hospital care. But most people don’t have to lie for weeks in a hospital bed to get healthy. And lavishing more money on hospital care will simply drive the price up — just as giving everyone a $2,000 vehicle subsidy would jack up prices for cars and trucks.

Yet this is what politicians routinely propose for higher education: Send more people to college, and give them more money to help them get there. Virginia Gov. Bob McDonnell proposed cranking out 100,000 more college degrees in 15 years. Around the same time, President Barack Obama said he wanted the U.S. to have “the highest proportion of college graduates in the world” — which would more than double enrollment. His new higher-ed plan calls for yet more financial aid.

Aid to higher ed already has exploded: In 1964, federal student aid was only $264 million, or $1.7 billion in current dollars. Today, the feds shell out $105 billion a year just in student loans. Total federal aid has soared from $64 billion (in 2000) to $169 billion (in 2010).

Flooded with such largess, colleges have sent prices skyward (tuition is up more than 500 percent over the past three decades) and indulged in luxuries that would have made Marie Antoinette blush, from gourmet dining halls (sushi at Bowdoin, vegan at JMU) to rock-climbing walls. Last month, Virginia Commonwealth University announced the construction of two new dorms that will add 426 beds. Their $41 million cost comes to more than $96,000 per bed. Thank goodness Virginia is, comparatively, fiscally conservative: Princeton recently built a dormitory at a jaw-dropping cost of almost $300,000 per bed. 

Trend lines like these cannot go on — and they won’t. But not because of politicians’ efforts to rein in college costs. College costs will drop because of market forces politicians will be powerless to stop.

In his new book Average Is Over, George Mason University economist Tyler Cowen explains why: Thanks to the Internet, you no longer have to sit in a lecture hall to get a superb education. And you certainly don’t have to shell out ungodly sums for five-star dormitories, Olympic-level gymnasiums and sushi bars.

You already can learn a great deal online for free from Wikipedia, TED lectures and so on. That information is unorganized, but many universities have begun offering organized instruction online through MOOCs — massive, open online courses. (Want to take one? Go to Coursera.org.) And “once an online course is created,” Cowen writes, “additional students can be handled at . . . close to zero cost.”

This is tremendously democratizing. To take a financial-markets course from Sterling Professor of Economics Bob Shiller, a poor kid in South Central Los Angeles or Bee Branch, Ark., no longer has to apply to Yale — hoping against hope to get in — and then beg or borrow tens of thousands of dollars a year to pay the freight. He can take the class online. Just as deregulation made air travel available to (nearly) all, online education will make college available to nearly all as well.

Granted, air travel today is much less luxurious than it once was. Won’t technology-facilitated education be equally plebian? The question falsely assumes a student at Big State U. is getting a top-notch education now. And it ignores the ways technology could improve higher ed.

For instance, Cowen writes, “when the best courses serve … hundreds of thousands of students, or maybe even millions, the financial returns to pedagogical innovation will be looked at in a new light.” Imagine writing a killer app that explains the concept of opportunity cost in a clear and entertaining manner: “As a society, we’ll put a lot more effort into teaching things better.”

Changes like this could benefit star professors tremendously, but they might not be such good news for the average instructor, whose role could shift dramatically. At Virginia Tech, 8,000 students a year take introductory math from hundreds of computers set up in a renovated big-box store — with non-tenured assistants on hand to answer the occasional question from the perplexed.

Yet Cowen argues there will always be a place for professors. Some institutions, such as certain Ivies, trade on their exclusivity and might not wish to give credit for courses taken online. Some students lack the self-motivation to learn on their own, and for them the professor will serve as “role model . . . motivator [and] exemplar.” Those teachers could “consult the machines to better understand the mistakes their students are making” and “outline a course for improvement.”

Finally, the revolution in higher ed could hasten the end of the sheepskin as a signifier of intellectual horsepower.

Just look at how technology has revolutionized chess instruction, Cowen says: No longer do you need to study for years with a chess coach to reach the zenith of the game. Aspiring grandmasters now learn from computers and online game play, and merit is all.

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  • entropy||

    Recently, I've been watching Leonard Suskind's lectures on General Relativity at Stanford on youtube, just for kicks.

    If you want to really, really, REALLY understand Relativity in a way that the media pop culture types can't even comprehend, you can watch one of the worlds most preeminent physicists go over it in excruciating detail, math and all, bit by bit, for free in your pajamas. The thing that got me hooked was I realized it's so much more entertaining (and educational!) than watching the damn dumbed down Science channel which I'd probably otherwise be doing, which seems to have sensed an opening and become the SciFi channel ever since the SciFi channel went full retard and became a 'global lifestyle brand' centered on WWE wrestling.

    It made me feel not retarded, unlike everything on TV, and maybe not even a total waste of time for watching. I actually learned shit! It's challenging, so it's engaging. The only time TV engages me anymore is when it pisses me off rambling about ancient alien ghosts at Thanksgiving and pretending it's edifying or intellectual to do so. I get so sick of (and insulted by) the tawdry sensationalism of every single thing on the idiot box.

    If you want to understand all of it though you should probably start by finding a free course on vector math.

  • Almanian!||

    But Brawndo has what plants crave - it has electrolytes...

  • AlexInCT||

    I can talk to plants and they told me they want water... yes from the toilet..

  • db||

    I would love to find a good Youtube series on tensor calculus.

  • Alien Invader||

    Is there anything good about tensor calculus?

  • Thomas O.||

    Sounds like a cool name, anyway... like for a Transformer or a guy in nerd-porn.

  • Pro Libertate||

    It's quite frustrating how dumbed down many documentaries are, even relatively decent ones. I love that real lectures are available on the web.

  • Heroic Mulatto||

    The average documentary on tv's primarily purpose is entertainment. That's what tv is for, entertainment. So it doesn't bother me as much.

  • Pro Libertate||

    No, I get that, I just wish it weren't true. I mean, a lot of times, the topic will be interesting, but the discussion will be sooooo slow moving as far as actual facts are concerned.

  • Heroic Mulatto||

    Well, not everything can be Victory at Sea, ya know!

  • Pro Libertate||

    Someone should launch a more intelligent network and market it as only for smart people. In fact, they should imply that idiots shouldn't bother watching it.

  • Heroic Mulatto||

    Isn't that PBS/NPR's entire marketing strategy?

    Look how well that turned out.

  • Pro Libertate||

    Nah, they seem to market more towards political fellow travelers than to the intelligentsia as a whole.

  • Heroic Mulatto||

    I was specifically thinking of this.

  • Rhywun||

    From the link:

    "We need to be reminded regularly that our culture is decaying"

    Yawn. Tedious moral gatekeepers are tedious.

  • entropy||

    It use to be that the Discovery channels were like that, sort of. They had shows like the old BBC "Connections" and decent documentaries and stuff.

    But the thermodynamics of cable programming ensures that everything turns into WWE wrestling in the end. It's called the WWE Wrestling Death of the Universe.

    All the channels, all of them, just get dumber and dumber and dumber.

  • Pro Libertate||

    Only the Internet and on-demand programming can save us now.

  • Heroic Mulatto||

    I think you stumbled across the answer here, PL. What educated professional doesn't have the Internet and/or broadband at home? Now think of the kinds of folks who are stuck with basic cable. It's no mystery that cable channels market toward their demographic.

  • Death Rock and Skull||

    All the idiots would watch it then. It would be like Shawshank Redemption- intellect for retards.

  • Doctor Whom||

    I taught myself vector math and a fair amount of relativity, among other things, in high school. I skipped my freshman year of undergrad, thanks to AP, and could have done without some of my sophomore courses as well.

  • Death Rock and Skull||

    Why the hell did this alien shit end up on the History Channel?

  • entropy||

    For the same reason WWE wrestling wound up on scifi, reality TV tween dramas on Music TV, etc. etc. etc.

    I told you, it's the WWE Death of the Universe. It's ratings entropy.

    Every channel wants to be the General Programming channel that the tards watch because they lost the remote.

    It is the largest demo, but you'd think with 670 channels competing for the same demo it makes it less attractive.

    All the same, every channel that starts off by catering to a niche market eventually tries to grow out of it by abandoning the niche that made them and trying to become the General Tard Programming channel, which includes changing their name to a 3 letter acronym that doesn't stand for anything.

  • Wizard4169||

    "Acronym" tain't the same thing as "initialism", dagnabbit! If you pronounce it phonetically as a word, it's an acronym. If you pronounce the letters individually, it's an initialism, dammit! "LASER" (Light Amplification by Stimulated Emission of Radiation) is an acronym. "NASA" (pronounced Nass-uh) is an acronym. FBI (pronounced Eff-Bee-Eye, not FBee) is an initilialism.
    Okay, sorry, I've indulged my linguistic pet-peeve of the day. Well, one of them, anywho.

  • CE||

    Because they ran out of Hitler documentaries?

  • entropy||

    Nah.

    Now they just do Occult Hitler documentaries.

  • R C Dean||

    I think you mean the "SyFy" channel.

    Which tells you everything you need to know. At one time, as a big SF fan, I would have thought a channel devoted to SF would be awesome.

    The reality? I am disappoint.

  • entropy||

    Back in 1999 it WAS awesome. The whole thing started going downhill the minute they cancelled MST3K.

  • Rhywun||

    And replaced it with 15 "different" ghost-themed shows.

  • Juice||

    I wish there were science channels for people of different levels of education on certain topics, but the audience would be much smaller. But, people might actually learn something rather than having the subject so dumbed down that it really doesn't teach you anything new.

  • Heroic Mulatto||

    Some students lack the self-motivation to learn on their own

    Some students? Hinkle, please!

  • Live Free or Diet||

    I'm a parent. I'm ready for college prices to come down.

  • Thomas O.||

    Ditto. For me, one kid's in 4th grade, the other starts kindergarten in a couple years.

    I myself only needed one year of community college to get a certification in graphic arts, and with that and some luck, I managed to live independently for 21 years now without ever having to move back with the parents. Hopefully my kids will do just as well, if the nation still holds together.

  • CE||

    Thanks to the Internet, you no longer have to sit in a lecture hall to get a superb education

    I recommend starting with the comments on H&R.

  • fish_remote||

    I recommend starting with the comments on H&R.

    Just as soon as snark becomes a marketable commodity I'm set for life...thanks to all of you. My only regret...that torrid night spent with STEVE SMITH.

  • Almanian!||

    Snark aside (no, SRSLY), HyR is totally what got me started on the road to...away from serfdom.

    Got here via RealClear linked article - the rest....

    I've learned a lot. PLUS snark. EVERYONE WINS!

  • CE||

    Imagine writing a killer app that explains the concept of opportunity cost in a clear and entertaining manner...

    I would, but there are so many other things I could do with my time.

  • R C Dean||

    I think you just wrote the app, CE.

  • Heroic Mulatto||

    Something conspicuously absent from Hinkel's article is assessment. How do we know the student has attained mastery of the skill being instructed? It is tempting to just hand-wave such concerns by labeling them mere credentialism; however, if I am an employer, how can I be certain that Wiki U. isn't just a diploma mill? How do I even know that it was Mr. X taking the course from behind his monitor as opposed to his smarter friend Mr. Y?

    Institutions such as the University of Phoenix seem to be accomplishing this, but as its reputation grows, won't the price of its tuition rise in concert with its increased perception of value?

    And a second, more pressing concern, is that how can college football players Skype onto the field? Is the future of college sports going to be a sports sim?

    Discuss.

  • LynchPin1477||

    if I am an employer, how can I be certain that Wiki U. isn't just a diploma mill? How do I even know that it was Mr. X taking the course from behind his monitor as opposed to his smarter friend Mr. Y?

    One idea that quickly comes to mind is an employment entrance exam. Businesses could contract with some place like U of Phoenix to develop the exam--all the employer has to do is describe the skills that they want verified. Prospective employee goes sits at a computer in a conference room and takes the test.

    won't the price of its tuition rise in concert with its increased perception of value?

    Supply and demand would seem to say "yes", but there would still be pressure to keep costs down.

  • Heroic Mulatto||

    Businesses could contract with some place like U of Phoenix to develop the exam--all the employer has to do is describe the skills that they want verified.

    That makes sense. Universities already do this, in a way, with both private and public employers. For example, most schools of Education require their students to take their state's teacher licensing exam before they graduate; thus, the curriculum of the department is designed around the test. I also know that my university's Business department has several connections in local business leaders, who have input into the program's curriculum.

  • CE||

    If you trust diplomas now, you have the same problem.

    And I predict the BCS conferences will split off from the NCAA and just go semi-pro, drafting high school players and signing them to 4-year contracts.

  • AlexInCT||

    "If you trust diplomas now, you have the same problem."

    ^^^THIS^^^

    Some of the biggest idiots I have had the misfurtune of dealing with were also the most credntialed ones...

  • R C Dean||

    *coughs*, looks around, edges toward door . . . .

  • LynchPin1477||

    And a second, more pressing concern, is that how can college football players Skype onto the field? Is the future of college sports going to be a sports sim?

    It will all be replaced by EA Sports

  • CE||

    So I have a chance to be drafted after all!

  • Almanian!||

    It's in the game

  • Christophe||

    My alma mater is big on cooperative education.
    A 4-year bachelors incorporates 2 years worth of work experience. At the start employers hire you because you're cheap and a 4-month stint is very little risk for them.
    At the end, if you're any good, you've got multiple past employers competing to hire you fulltime.
    It's a great approach, and it often pays for the cost of the education. With the lower tuition of MOOCs, you're cashflow positive.

  • ||

    The online college I attended, which operates on a competency-based assessment model, had proctored exams administered in-person at testing facilities like Prometric or at at a local community college. Virtually all legitimate degree-granting online schools use third party in-person proctors for exams.

    Understand that, currently at least, MOOCs do not confer any credit towards a degree or credential. And even in the extremely unlikely event that Hinkle's prediction ever comes true and massively open online learning becomes accepted and mainstream, the exclusivity market will never disappear. We see that even in today's education market. There's a reason why people still pay 100k a year to go to Harvard or Wharton instead of East Podunk University business school, even though all three are AACSB accredited and will teach nearly identical skills and concepts. So don't you worry your elitist head not one little bit: just having the knowledge for free still doesn't mean shit without the degree that you must pay for. The plebs will still be plebs 100 years from now, probably 1,000 years from now. The unwashed masses aren't going to crash your teacher's lounge. Even if they get a little smarter through shared knowledge, they'll still be the underclass. All's right with the world.

  • AlmightyJB||

    Unfortunately many large corps still value sheepskins and acronyms over knowledge and experience. Not seeing that trend reversing anytime soon.

  • DH||

    I think we're forgetting another variable here. Kids want to go to traditional school. They want the experiences of living in a dorm. Going to keggers, screwing around and all that shit. Hell I would say a majority of people anymore just go for that. They pop in for a year or two, live the lifestyle, get away from home and rack up debt, then drop out. No doubt online schooling is popular and will probably draw a larger percent of students in the future, as long as mommy and daddy, and big brother government are willing to throw money at students to go, in addition to the need for that piece of paper with a particular school name on it, traditional college will always win out.

  • LynchPin1477||

    A lot of people treat college as a party because they can get low or zero interest loans to subsidize the experience, regardless of how they perform or what they study. Take those away and I suspect people treat college a lot more seriously.

    Kids do want to go to a traditional school, and not without good reason. I loved my big university experiences. But there is a difference between what one wants and can afford.

  • R C Dean||

    And if they're willing to pony up six figure sums for an extended adolescence, more power to them.

    The problem we have now is the package deal. You have to fund the extended adolescence to get the professional credential.

  • Death Rock and Skull||

    That's because companies have the incentive to do so- because of higher education subsidies.

  • Redmanfms||

    That's because companies have the incentive to do so- because of higher education subsidies.

    You're going to have to connect the dots on that one.

  • Death Rock and Skull||

    More people get (usually worthless) degrees because the cost is subsidized. Employers are then able to use "having a degree" as a qualification.

  • Redmanfms||

    You are missing a vital step between this:

    More people get (usually worthless) degrees because the cost is subsidized.

    and this:

    Employers are then able to use "having a degree" as a qualification.

    Why would the employer concede to such an arrangement if the degree was worthless? What "qualification" does it provide them?

  • Death Rock and Skull||

    Easy applicant narrowing. And all the recruiters for bigger companies also got worthless degrees, so they don't necessarily know or care that they're worthless. Nobody gets a job pertaining to their degree, outside of a few things.

  • Christophe||

    Applicant narrowing is a big win for lazy HR departments.
    Even the shitiest degree is a better signal than 'stair sorting'*.

    * Throw the resumes at a flight of stairs. Only read the ones that flew furthest, the other guys are demonstrably not "lucky", so don't hire them.

  • Redmanfms||

    Thanks to the Internet, you no longer have to sit in a lecture hall to get a superb education.

    Education without certification is practically worthless unless you are self-employed. Being self-employed can be great, but isn't practical for a lot of people. Even if you are self-employed there are certain fields that absolutely require some form of professional license or certification. You want to start your own civil/residential engineering business (just as an example)? Guess what, Khan Academy and TED Talks ain't gonna hack it.

    I was under the impression that MOOCs are mostly non-transferable. Has that changed?

  • Heroic Mulatto||

    Even if you are self-employed there are certain fields that absolutely require some form of professional license or certification.

    Indeed. However, one could argue that a standard 4-year college education isn't the only way to do this. I could envision a hybrid-model of online courses and a period of apprenticeship.

  • AlmightyJB||

    A lot of corporate departments (IT, Finance, Marketing, HR, etc) are often evaluated by external companies for accolades such as "world class", "best in class", or whatever top dog type ranking. Part of the criteria for these accolades are numbers of employees with advanced degrees and number with certifications (some of which require advanced degrees). These ramkings can then be used by the C%%'s to bolster their own resumes.

  • Redmanfms||

    Indeed. However, one could argue that a standard 4-year college education isn't the only way to do this. I could envision a hybrid-model of online courses and a period of apprenticeship.

    Yeah, true. My post was about the facts on the ground, not hypotheticals.

  • Jordan||

    Certification does not require brick and mortar colleges anymore than coursework does. Have students sign up to take a test administered by an accrediting body when they feel ready.

  • AlmightyJB||

    Perhaps they shouldn't require degrees but most professional certifications currently do. And of course those already having the certifications constently work to increase the qualifications necessary (grandfathering themselves of course).

  • Jordan||

    Well, yes. That's how it currently works. But that's not how it has to work.

  • Death Rock and Skull||

    Let's get the Institute for Justice on it. Surveying, very recently, was all apprenticeship and continuing education. Now every state is requiring random ass degrees, a "surveying degree" hardly exists. I could have picked up that shit out of high school.

  • ||

    So what you're saying is that I should get me architectural license and then lobby to make it so those who come after me have to get a Doctorate instead of the Masters I did?

  • Redmanfms||

    Certification does not require brick and mortar colleges anymore than coursework does. Have students sign up to take a test administered by an accrediting body when they feel ready.

    See my response to HM above.

    There was a time in the past when one apprenticed at nearly everything, including law and medicine. That time is over. Much like how power generation became increasingly more centralized, education and professional certification has also. There is a reason this is true, it reduces labor costs for potential employers. Automation and computers have removed much of the need for most of the "idiot" jobs that were given to apprentices to make them somewhat useful, therefore keeping them around just costs money and might not net a productive future employee.

    Degree certification allowed businesses to certify that a perspective employee had the requisite knowledge to perform certain tasks and learn the other more specialized tasks. It also showed perseverance on the part of the prospective employee, showing the employer that this person was less likely to quit or stall in place if they met a challenge.

    I'm sorry guys, I do not see this trend reversing anymore than I see windmills and home solar panels supplanting big-ass power plants.

    BTW, are MOOCs transferable, nobody answered that.

  • LynchPin1477||

    I see this discussed a lot in the context of a hybrid model. There will probably still be a place for brick and mortar universities, but most of the work will be done online with short term in-class sessions as a supplement. That can also be the time when you administer exams. That is just one possibility among many.

  • Heroic Mulatto||

    There will probably still be a place for brick and mortar universities

    Right. A great deal of the "good" universities in America are research universities. They need a physical space to have their laboratories and such.

  • Andrew G.||

    That's nothing, Yale is adding 2 new colleges for 800 students at a price of around $500 million. Or $625,000 per head.

  • AlmightyJB||

    A pittance to keep out the riffraff.

  • Death Rock and Skull||

    Subsidies and subsidized loans for all higher education just needs to end, and the academic "authority" structure needs to be taken down a few pegs as well.

  • AlmightyJB||

    true dat

  • DH||

    I've heard from a lot of my elders that they used to be able to work all summer and then be able to pay off most of a year of school, in addition to paying for a car and other stuff. I suppose though that's not really doable anymore what with the lack of good paying seasonal jobs that a college kid could just pick up if they wanted.

  • R C Dean||

    Those weren't "good-paying" jobs back in the day.

    Costs were just that much lower back then.

  • AlmightyJB||

    HR people also do a lot of CYA which means major university degrees and certificates will always be an advantage.

  • thorax232||

    Here's an idea, get rid of the monopoly on accreditation and allow companies to decided what is and isn't worthwhile.

  • Gorilla tactics||

    I would like to refer you to Griggs vs Duke power.

  • concerned cynic||

    In 2005, a young man showed my YouTube for the first time. Within 5 minutes I realised that the way I had earned my living more than 20 years, teaching college classes, was doomed. Dissemination of knowledge via canned prerecorded lectures, disseminate YouTube style, was the shape of things to come in all large undergrad service courses. The Assessment would be by online quizzes. The only skill that could not be taught in this manner was how to write good clear English prose.

    And I fully agree with Cowen and Hinkle. The YouTube style will dominate because while it has nontrivial fixed costs, its marginal costs are near zero. Bean counters in state government will force the change, simply to save the taxpayer money. Harvard and Stanford will continue more or less as they are, but will have to lower what they charge somewhat.

  • Habeas Dorkus||

    I've watched some Yale and GWU lectures online. Trust me, they are mere teasers to what you would get in a classroom -- homework, tests and all. To insinuate that you can anything close to a college education online, for free, is laughable. Until the day that they give all of it away for free -- the lectures and the texts -- and GRILL the cyber-students on their comprehension of it, "free" college education will be forever a phantasm.

  • Habeas Dorkus||

    Want a free education? Butt-fuck/rape an old lady and go to prison. Prison law libraries dwarf those of many institutions.

  • Slothrop||

    I ponied up for a high-ranked private college. Going to a traditional classroom class means actual interaction with a human being who has attained some level of mastery over a subject much greater than your own--go to a school that only admits very strong students, and this person can teach you stuff at an advanced pace and level of complexity. Go to a crap school and some nobody with a master's degree from some other crap school will teach a dumbed-down version of the material to you along with other students who need the material dumbed down to understand it. One is going to cost less than the other because it's not as good of a product. Obviously it's more complicated in practice, but these are still the basic market forces at work.

    Watching videos and taking quizzes on a website is not the same thing--what I got for my money was people who, while not celebrities or anything (this wasn't Harvard or anything), were smart and accomplished scholars, giving me challenging assignments to do after explaining things to me in person, where I could ask them questions, and then providing personal feedback on my work that gave me their specific input on how I could improve. I considered that worth the money and still do. Obviously I could have just gone to a library and read a bunch of books on the same subjects, but I wouldn't have gotten the feedback on my own ideas or the personal advice.

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