Soaring tuition and crushing student debt have risen faster than inflation for decades. Then came coronavirus, which has prompted massive college layoffs. The higher education bubble, we are told, has finally burst. It’s high time for a change, you might say, given preposterously high prices -- almost $80,000 a year for some prestigious private colleges.
Yet as anyone who has worked with a college budget can tell you, the sticker price is a mythical number. At Yale University, for example, students whose families earn under $75,000 are expected to pay zero dollars in tuition and fees. At Ithaca College, now planning to lay off up to a quarter of its faculty, 95 percent of first-year students got scholarships last year. It’s typical at private colleges to pay about half the sticker price.
But hang on, you’ll say, even if I get the discount rate, I’m still on the hook for at least $25,000 every year. Surely the institution has invested too much in fancy facilities. Or the administration has gotten bloated. College can’t possibly be worth that much, can it?
Yes, it can. For starters, learning is an intrinsic good. Higher education is also a crucial economic engine, beneficial to the individual student, the local community and the nation as a whole.
And while college may seem overpriced, the bachelor’s degree is still an excellent investment. Those who graduate with bachelors’ degrees have double the lifetime earnings of those with high school diplomas. Not going to college is especially harmful for people of color. For Black Americans, wages for those with college degrees have gone up by 15 percent since 1977, while Black high school graduates have seen them fall 6 percent.
Moreover, contrary to popular belief, the cost of college isn’t inflated. Even the sticker price doesn’t cover the real cost of educating each student. At the University of Wisconsin at Madison, for example, student tuition and fees make up only 20 percent of the total university budget. A full 60 percent of the university’s funding each year comes from grants, gifts and profit-making services. Even private institutions like Cornell University garner only a quarter of their budgets from tuition.
Why does it take so much money to run a college? The main reason is that higher education, like health care, depends on highly skilled workers who can’t be replaced with robots. While increasing mechanization keeps the price of potatoes and coal low, education and health care can’t get endlessly more efficient. Just as a doctor can’t see 1,000 patients a day, a professor can’t teach ever larger classes effectively, since frequent feedback and high-level engagement between teachers and peers are crucial to learning the skills the labor force most needs -- including clear communication, quantitative methods and flexible problem solving. In short, high-quality education is an expensive enterprise.
But it is also worth it -- and not only for the student. Across the nation, local communities depend on colleges for their economic well-being. From Sterling, Kans., to College Station, Tex., to Ann Arbor, Mich., lively college towns draw restaurants, rental profits, arts organizations and retirees. Start-up companies looking for highly skilled labor come to college towns. Coronavirus closings threaten ruin to local economies.
Even if you don’t live in a college town, you’re still benefiting from higher education. Educated workers launch job-creating industries. And high percentages of college-educated people raise wages for everyone. In 2010, for example, Minnesota started investing in education, while Wisconsin made major cuts. By 2017, Minnesota had outpaced Wisconsin in overall economic well-being, with stronger job growth, wage increases across the population -- especially among low-wage workers -- a shrinking gender wage gap and reductions in poverty. If we ignore those positive spillovers, we are not weighing the actual costs and benefits of college.
The crisis in higher education hurts all of us. And there’s one clear solution: a major industry bailout. This is the perfect time, as the country needs smart stimulus plans to get the economy going. We also have a new administration that explicitly seeks to "strengthen college as a reliable pathway to the middle class" and support colleges and universities that play an important role in their communities, including historically Black colleges and universities and minority-serving institutions.
When the auto industry was hit hard in 2008, the U.S. government supported its comeback with $80.7 billion, buying stocks in GM and Chrysler and providing incentives to spur new car purchases. That was smart. The total of $440 billion disbursed brought $442.6 billion back to the U.S. Treasury, saved jobs and kept the economy going.
More recently, the airline industry, which employs 750,000 people, has gotten $25 billion in coronavirus relief. Higher education employs nearly four million people and enrolls 20 million students. It received $14 billion, about 0.5 percent of the CARES Act.
Let’s not get distracted by phony populist arguments. Middle-class wages for those without college degrees have almost entirely disappeared. If we don’t invest in higher education, we slow the economy and leave the poorest Americans increasingly far behind. A smart national investment now can keep struggling colleges open across the country, save local businesses, support kids who are fighting to make it into the middle class and train a globally competitive workforce.