Survey: Higher ed tuition prices hitting an economic wall?

posted at 4:01 pm on January 11, 2013 by Erika Johnsen

During his many campaign rallies and speeches at college campuses across the country, President Obama has often talked up the government’s goal of providing ways to help make college more affordable for anyone who wants to go and the utmost importance of making student loan debt (now approaching a record total of $1 trillion, by the way) more manageable — which is precisely why it’s so off-putting when he then laments skyrocketing college tuition prices in the same speech. While there are certainly bureaucratic and institutional flaws that many universities could probably work on to help bring down tuition prices, the federal government has been actively engendering a higher-education bubble for years: When you put national policies in place that increase consumer demand for higher education, the price of higher education is going to go up, as any college student would hopefully learn in their Introduction to Economics class.

But with a now persistently awful youth unemployment rate (that recently broke the worst record since World War II) and declining median family incomes, it suddenly looks like more potential students and their parents are more carefully assessing whether such a huge investment in higher education is worth the risk. Decades of tuition increases may be winding down, according to a new survey by Moody’s Investors Service, as the waning demand for four-year college degrees saps a growing number of American colleges’ pricing power, reports the WSJ:

Facing stagnant family income, shaky job prospects for graduates and a smaller pool of high-school graduates, more schools are reining in tuition increases and giving out larger scholarships to attract students, Moody’s concluded in a report set to be released Thursday. …

For the fiscal year, which for most schools ends this June, 18% of 165 private universities and 15% of 127 public universities project a decline in net tuition revenue. That is a sharp rise from the estimated declines among 10% of the 152 private schools and 4% of the 105 public schools in fiscal 2012. …

Moody’s also attributed the enrollment decline at some public universities to a “heightened scrutiny of the value of higher education” after years of tuition increases and stagnating family income. The credit-rating firm said in its report that more students are “increasingly attending more affordable community colleges, studying part time, or electing to enter the workforce without the benefit of a college education.” …

In short, the federal government has been handing out easily attainable subsidies with which people have been acquiring degrees for which the post-college job world does not necessarily harbor a high demand, directly helping to jack up tuition rates; and in current conjunction with the less-than-robust Obama economy of high unemployment and declining wealth, enrollment is now on the decline — which means pretty big financial troubles may be in store for higher ed. This new normal might mean a huge readjustment is in the works in the secondary-education world, including a downshift from four-year liberal-arts degrees and an increase in online classes and vocational training, but kind of funny how these liberal policies so often accomplish the opposite of their intent, isn’t it?


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The bubble is about to burst…

d1carter on January 11, 2013 at 4:07 PM

I think this is the same backwards cause/effect reasoning that caused the housing loan problem. We measure success by certain indicators, and one of those indicators is owning a home. Therefore, according to some, if more people owned their own home, more people would be successful. Not correct, of course, and now we have financial problems for people who participated in this faulty logic. Likewise, having a college degree used to be an indicator of success, and now, etc.

apostic on January 11, 2013 at 4:10 PM

Wait for it…

“A six figure job after graduating from college with a useless degree is a right!!!” 5..4..3..2..1..

NapaConservative on January 11, 2013 at 4:13 PM

Never fear, BO will excuse all the student loans of the young knuckleheads who so foolishly spent theirs…while we oldsters who have been paying ours off for years will have to continue to do so.

Bob's Kid on January 11, 2013 at 4:14 PM

Colleges are ridiculous hothouses operating on other people’s borrowed money. This cannot go on forever. My son’s college is on a crazy building binge, as have been most colleges for the last several years. It’s been a silly arms race for the best facilities to attract more funding and more students. At some point it all has to crash.

Attitudes are shifting really quickly among my generation of parents. I have one in college and one two years away who may not end up going to college at all. Just a few years ago that would have been unthinkable. But many parents of current high schoolers are older parents whose retirement savings have been decimated by this recession. We now have to decide, do we blow $50-100,000 on our next kid’s college when it might not even help him/her get a leg up on a career, or put that money into our own retirement, which we know we will need as Social Security and Medicare will be bankrupt in another 10 years when we retire. I am amazed how many people I know in my rather affluent community who are sending their kids to community college, to the “safety” school with the $5000 tuition, or not sending them to college at all.

It is not just the high cost of college and the reduced prospects for graduates that is changing people’s behavior, it is the parents assessing our own financial needs and deciding we need to keep that money for ourselves so we don’t end up in poverty in our old age. And that is a product of the Obamanomics we are living under.

rockmom on January 11, 2013 at 4:17 PM

An associated problem is the flotilla of new and cumbersome regulations dropped on higher ed institutions by the Dept of Education. They are taking many hours to decipher and incorporate, and the actual changes are not beneficial to anyone IMHO. Thanks Arne Duncan.

indypat on January 11, 2013 at 4:17 PM

I am a firm believer in a college education, as long as that education will provide a return on the considerable investment required to get the sheepskin. If, on the other hand, there is no return than the education is not worth it. The world needs plumbers and electricians too. Many of them make north of 100k.

Pelosi delende est on January 11, 2013 at 4:19 PM

The biggest scam in the country is BIG COLLEGE/BIG UNIVERSITY which are totally controlled by sleazy low life liberals… They have been scamming stupid students and their stupid parents by charging $ 40,000 a year for a totally useless degree in liberal arts that has very little chance of getting its holder a decent job to make up for a total $ 160,000 in a 4 years worthless college education.

There should be a law that requires colleges and universities to tell the student in very clear terms and based on the last 10 years market studies what is the probability of him/her getting a job based on the degree he/she is trying to get and how much money he/she is going to make because of this degree. Also no tax payers funded loans should go to any student who is seeking a meaningless liberal art degree i.e. most of the liberal arts degrees.

mnjg on January 11, 2013 at 4:20 PM

Never fear, BO will excuse all the student loans of the young knuckleheads who so foolishly spent theirs…while we oldsters who have been paying ours off for years will have to continue to do so.

Bob’s Kid on January 11, 2013 at 4:14 PM

Don’t worry – I’ll continue paying my loans on top of ponying up for out of control entitlement programs for “you oldsters” that I’ll never see in my old age : )

JDF123 on January 11, 2013 at 4:20 PM

Actually tuition prices should start contracting in real terms as people will have to learn to live their lives with less and less debt. Young people today will have so much of their income taxed in the not too distant future in order to pay the retirement benefits of people who are far better off than themselves financially, who have a standard of living that the young people are much less likely to obtain for themselves when they are comparably aged because, paying such a huge percentage of their salaries over so many years of their lives will make it that much harder for them to save and provide for their own retirements.

FloatingRock on January 11, 2013 at 4:21 PM

Another stupid price bubble created by malevolent liberals.

tom daschle concerned on January 11, 2013 at 4:25 PM

There are competitors starting to pop up in the higher education world as well. I predict we won’t be laughing at people who got their degrees online in a few years. The bubble is about to burst.

Pelosi delende est on January 11, 2013 at 4:26 PM

Not Funny.

Where am I going to send my kids for a decent liberal indoctrination, (while forcing myself to work extra years to pay for it) now?

WryTrvllr on January 11, 2013 at 4:30 PM

Don’t worry – I’ll continue paying my loans on top of ponying up for out of control entitlement programs for “you oldsters” that I’ll never see in my old age : )

JDF123 on January 11, 2013 at 4:20 PM

If you’re still paying off your student loans, your “share” of the social security ponzi was gone a LONG time ago.

WryTrvllr on January 11, 2013 at 4:33 PM

The bubble is about to burst…

d1carter on January 11, 2013 at 4:07 PM

Yep.

forest on January 11, 2013 at 4:38 PM

Try requiring tenured professors to spend AT LEAST 15 hours per week teaching live students in real classrooms. You wont believe the uproar that just the suggestion would cause from the the world of academia. For fun, just look at the class schedule of the tenured professors at a college in your area. You are in for a big surprise

Just that one change would cut cost by more than you can imagine

minus200 on January 11, 2013 at 4:40 PM

If you’re still paying off your student loans, your “share” of the social security ponzi was gone a LONG time ago.

WryTrvllr on January 11, 2013 at 4:33 PM

Didn’t stop me from maxing out on my SS contribution twice last year (yeah – I changed jobs). Also, the $8-10K in student loan repayment that I made last year (paying for mine and my wife’s – she doesn’t work) isn’t tax deductible. Nor do I get any child tax credits for any of my six kids. But, hey, I have negative net worth, so I must be rich or something and need to pay my “fair share.”

besser tot als rot on January 11, 2013 at 4:44 PM

JDF123 on January 11, 2013 at 4:20 PM

and

FloatingRock on January 11, 2013 at 4:21 PM

the awakening may be occurring…

DanMan on January 11, 2013 at 4:45 PM

…whether such a huge investment inflated price tag in higher education marxist indoctrination is worth the risk.

FTFY

rayra on January 11, 2013 at 4:46 PM

Where am I going to send my kids for a decent liberal indoctrination, (while forcing myself to work extra years to pay for it) now?

WryTrvllr on January 11, 2013 at 4:30 PM

Well, given how the left tends to turn the military into an ineffectual series of social experiments, and given how high your taxes are likely to go….

apostic on January 11, 2013 at 4:47 PM

Will those finishing their Doctorates in Crop Circles, Drumming Circles and Womans Studies be able to finish their important and challenging paths?

BL@KBIRD on January 11, 2013 at 4:47 PM

This is not necessarily a bad thing. Far too many classes I teach are filled with people who do not have the skill to be there, and really aren’t interested in being there. What needs to be downsized are the massive construction projects, the massive administrations, the massive recreational facilities. Get back to the art of education for education’s sake, lower tuition, emphasize strong curriculum and end grade inflation. Sounds great to me!

libfreeordie on January 11, 2013 at 4:57 PM

Good thing in one aspect. Maybe now the systems won’t be able to support all those commie America hating professors who infiltrated higher ed since the revolution against all Godly authority in the 60s.
Just red-fed kids who continued the glorious lies of the left as professers themselves in order to always be against that which is good.

The ex-educator believes strongly that far too many of our children should never go to college anyway. I doubt that the economics will be worthwhile for a long time, and with the large amount of them near uneducable, or at least not properly prepared to actually work hard, think, and distrust much of what they are fed, America and the kids will be better off in the long run.

Don L on January 11, 2013 at 5:00 PM

Didn’t stop me from maxing out on my SS contribution twice last year (yeah – I changed jobs). Also, the $8-10K in student loan repayment that I made last year (paying for mine and my wife’s – she doesn’t work) isn’t tax deductible. Nor do I get any child tax credits for any of my six kids. But, hey, I have negative net worth, so I must be rich or something and need to pay my “fair share.”

besser tot als rot on January 11, 2013 at 4:44 PM

You’ll get your overpayment of the Social Security contribution back on this year’s taxes. The employer’s don’t, but when you enter your W-2s, the program should calculate the rebate. I get some back every year with my two jobs (to help support my 8 kids, so I know what you’re going through). Luckily, I paid off my student loans a long time ago….

seven_of_8 on January 11, 2013 at 5:05 PM

They should call most of these majors and universities what they are: Starbucks training.

JeremiahJohnson on January 11, 2013 at 5:25 PM

You’ll get your overpayment of the Social Security contribution back on this year’s taxes. The employer’s don’t, but when you enter your W-2s, the program should calculate the rebate. I get some back every year with my two jobs (to help support my 8 kids, so I know what you’re going through). Luckily, I paid off my student loans a long time ago….

seven_of_8 on January 11, 2013 at 5:05 PM

Yeah. I know. I was taking a bit of rhetorical license :).

besser tot als rot on January 11, 2013 at 5:25 PM

libfreeordie on January 11, 2013 at 4:57 PM

wow! y’all seeing this?

DanMan on January 11, 2013 at 5:27 PM

This is not necessarily a bad thing. Far too many classes I teach are filled with people who do not have the skill to be there, and really aren’t interested in being there. What needs to be downsized are the massive construction projects, the massive administrations, the massive recreational facilities. Get back to the art of education for education’s sake, lower tuition, emphasize strong curriculum and end grade inflation. Sounds great to me!

libfreeordie on January 11, 2013 at 4:57 PM

It still amazes me that *any* education funding is expended to employ someone as patently moronic as you routinely exhibit yourself to be. :)

Midas on January 11, 2013 at 5:38 PM

Let those libtard seminaries burn. They’ve handed out enough useless degrees to last a lifetime and it needs to stop.

Quartermaster on January 11, 2013 at 5:39 PM

There are competitors starting to pop up in the higher education world as well. I predict we won’t be laughing at people who got their degrees online in a few years. The bubble is about to burst.

Pelosi delende est on January 11, 2013 at 4:26 PM

I’m learning a couple of highly sophisticated computer animation programs by watching free online video tutorials. Why show a potential employer a piece of paper showing college courses completed when I can hand them a computer disk with samples of my work?

Of course, some subjects are worth attending class for. Think of all the interesting people you’ll meet studying 19th Century Chick Lit. :)

MichaelGabriel on January 11, 2013 at 5:41 PM

I just signed up for a 4 credit online class. $1808.00! Ridiculous!

qestout on January 11, 2013 at 5:42 PM

One of the few benefits of CA’s failed welfare state is to go to a community college and get an AA at a reasonable price. If you get your AA from a CA community college with decent grades, you will likely be admitted to a UC school. I know many people who have followed this path to UCLA, UCSB, etc.

Lou Budvis on January 11, 2013 at 5:59 PM

Try requiring tenured professors to spend AT LEAST 15 hours per week teaching live students in real classrooms. You wont believe the uproar that just the suggestion would cause from the the world of academia. For fun, just look at the class schedule of the tenured professors at a college in your area. You are in for a big surprise

I’m full-time (not tenured) teaching 36 credit hours per term at a state college. Hard to overstate the truth of the statement above. Lots of horror-stories I’m sure–at my school a tenured 6-figure prof taught one class a week then commuted to a different state where he was managing a farm. College is a caste system where royalty (administration) lives in benign splendor alongside landed gentry (tenured) while the merchant class (full-time, benefits) and the serfs (adjunct, no benefits) do the work.

PortlandJon on January 11, 2013 at 6:24 PM

I think this is the same backwards cause/effect reasoning that caused the housing loan problem. We measure success by certain indicators, and one of those indicators is owning a home. Therefore, according to some, if more people owned their own home, more people would be successful. Not correct, of course, and now we have financial problems for people who participated in this faulty logic. Likewise, having a college degree used to be an indicator of success, and now, etc.

apostic on January 11, 2013 at 4:10 PM

The parallel to the housing bubble is inescapable.

It’s easy now to spend $600 on textbooks for a single semester. Why? Because federal aid includes textbooks now.

Speaking of parallels, the price of healthcare is inflated because nobody pays for it directly. Everything is covered by insurance, which typically bases their payments on a percentage of the price. Raise the price enough, and you’re making a profit from the 75% or 80% the insurance pays whether the patient ever makes a payment or not. And when some PPO refuses to pay more than 50% of the price, it still doesn’t hurt at all.

tom on January 11, 2013 at 7:32 PM

emphasize strong curriculum and end grade inflation. Sounds great to me!

libfreeordie on January 11, 2013 at 4:57 PM

We would love to do that, but unfortunately we would up here because of Liberals. Do to the fear of RACISM! created by compassionate liberals, Liberals allowed for inflated grades, self-esteem, etc and opened such stupid majors as “womens studies”, Gay Studies, Black Studies, Black Fictional History, Social Agitation, etc.

The damage to generations of kids has been done. Like the companies put out of work over the spotted owl lies, they can’t be put back together, the only thing that can be done is to find those responsible (and their political enablers) and to throw them out in the street.

Bulletchaser on January 11, 2013 at 8:15 PM

When you put national policies in place that increase consumer demand for higher education, the price of higher education is going to go up, as any college student would hopefully learn in their Introduction to Economics class.

You forgot your “ceteris paribus” tag…

JohnGalt23 on January 11, 2013 at 9:19 PM

Trillion dollars in student debt is a trillion that has gone into the coffers of left-wing zealots, many of whom (cough, Bill Ayers) could not find other gainful employment.

Also, don’t forget that the colleges already have ALL this money. If a student defaults, they default on the bank, or I guess the taxpayers. The colleges have no motivation to limit loans to only good credit risks–they get their money up front.

PortlandJon on January 11, 2013 at 9:49 PM

Another big part of the problem is that our public servants cannot seem to figure out that some college majors contribute more to our economy than others. That STEM degrees, for example, are in demand and that we import students and professionals to fill that demand. We need doctors and engineers! Ah, but I suppose it is racist or some other form of evil to point out that a liberal arts or racial grievance degree is worth bupkis and that the only jobs for such are in … wait for it … government.

While some amount of taxpayer funding of higher eduction is appropriate, IMHO, that investment only makes sense when it is targeted towards fulfilling the need for the kind of skills that are in demand in our economy. Not only will that help satisfy the demand but it also enormously improves the prospects that the student loans will be repaid. As it stands now, we have created a massive student loan bubble that will require yet another trillion dollar bailout from we the taxpayers.

MJBrutus on January 12, 2013 at 5:58 AM

Note, 3rd hand but consistent: Former President Clinton visited students at the Univ. of MN in Duluth the week prior to the Nov. 6 election. He supposedly said that Obama would let students write-off their student loans – in other words, not pay back the money they borrowed FROM US.

One more irresponsible lesson to a generation that has been coddled far too much. They need to learn to EARN their way. “Heck, I borrowed money for my (useless??) college degree but I don’t have to pay it back.” Of course now they can’t get a job thanks to the Democrat government/interference policies, so…

College tuition has gone up 3x the rate of inflation since the 1980′s and the number of useless degrees probably tracks along the same line. The universities did this – more $$$ from the feds, raise the rates. Univ. of MN had increased administrative employees 50% faster than instructors (3x as fast as teaching payroll) and twice as fast as student enrollment.

MN J on January 12, 2013 at 6:51 AM

mnjg on January 11, 2013 at 4:20 PM

I understand the sentiment, but what we really need is a shift in ideas about the purpose of college. College is not trade school–the traditional purpose was to gain a knowledge in a variety of areas (science, math, philosophy, history, art, literature) to develop an intellectual framework that would help a person evaluate the world and what he encounters. Thomas Jefferson did not go to college because he knew it would help him find a job later.

The problem is not a liberal arts education. The problem is that a college education is viewed incorrectly, as job training. College degrees are used by prospective employers as tools for weeding out job applicants, and who can blame them, with the web of employment laws that make them practice “defensive employment” much as doctors practice defensive medicine? I know an employment law attorney who says our laws basically mean “never fire anyone for any reason, and worry when you hire that someone will cry ‘discrimination’”–with that state of affairs, employers must find ways to protect themselves, and requiring specific college degrees is one.

That said, colleges should have to demonstrate the value of what they offer, and as they currently perform, many of them would have difficulty justifying their existence. A classical education (of the Great Books variety) isn’t for everyone, but it has its place. A degree that seems to serve no purpose other than making sure a preening prima donna keeps her professorship, and creates a seething bundle of resentment who spends her adult life wondering why no one wants to hire someone with a Gay Cultural Studies degree, is going to have a tough row to hoe trying to demonstrate its value.

DrMagnolias on January 12, 2013 at 7:48 AM

…more potential students and their parents are more carefully assessing whether such a huge investment in higher education is worth the risk.

These are the parents in the middle class, whose children used to be targeted for merit scholarships. Now, under pressure from the Pell Grant/government, Financial aid offices are compelled to fill the financial “need” of Under Served students regardless of academic merit. And that uses up all the money.

Gone are the home equity loans and low interest Parent Plus loans that middle class used to be able to use…because homes are underwater, and government loans to parents start at 8%

The colleges could enjoy a resurgence of students by shunning the Pell grant and it’s mostly underqualified students, and using their money WISELY on merit based applications.

Right now, the accreditation agencies are pressuring them to keep the standards that Pell grant students get 100% of the other financial aid that they need first.

Trustees have to know what is going on. This is not the days of the academic scholarship of your youth, that got you thru college. There is very little merit scholarship money made available and they make the students battle it out for it in increments of $1000.

And in your red states, beware of monkey shines with the funding. You have to take control of your admissions, and the bureaucratic spending in your state, and the liberals invoking the accrediting agencies as an excuse to teach liberalism. And get your schools to stop basing things on The Pell Grant first, rather on admitting the students with merit. They jack the price up based on how much the Pell grant gives them for a typical Pell grant student…they could set tuition at zero, but they charge everyone what the Pell grant will pay them.

Insist on budget cuts at your state university that end bureaucrats, highly paid Diversity officers, and lawyers, and things no one needs. Cut thier salaries, and then set tuition and fees at zero, (keep materials fees where the student actually uses up the materials.) There is no reason for your state university to be educating anyone in anything below university level…so get the unqualified students back to the Community College…and for god’s sake, don’t give them a Pell grant if they did not complete “Remedial Anything” in High school. It is a monumental waste of money to teach high school subjects to college students.

Fleuries on January 12, 2013 at 1:16 PM

Can’t be sure but I think Karmi is messing with yall ala Bishop.
How does this kid and his sister go back to school and feel okay about being there after this nonsense. I agree with posters who are saying this was child abuse.

hopeful on May 31, 2013 at 6:26 PM

I usually number among those who post very cerebral and well reasoned posts on this blog. At the risk of giving the left cannon fodder for their loony positions, I will comment in a visceral way. Here goes: If this were my kid I can promise you that when I was done, this principle would have wet his pants.

MDLibertyLover on June 2, 2013 at 7:27 PM