As college costs continue to rise, students wonder if higher ed pays off

Skyrocketing college tuition rates have climbed more than sixfold over the past 30 years, leaving students and parents wondering if higher education is worth it.

During the last decade alone, overall U.S. prices went up 23 percent, according to the Consumer Price Index (CPI). Among the main categories of goods and services, college tuition increased by far the most — 40 percentage points higher than the average increase. Health care, child care and food prices have also risen more than average.

On the other side of the spectrum, prices have plummeted for televisions, computers and phones. Average prices for cars, clothing and even housing have also grown relatively slowly.

While many Americans are better able to afford toys, gadgets and other material luxuries, their capacity to spend on long-term investments like health and education has declined. Paying for classes at a university or time in a hospital has become more expensive, even as better-quality smartphones are cheaper. New research suggests that working-class Americans are not as resource-poor as they used to be, given the falling prices of ordinary household items.

But since middle-class family income is stagnant, Americans of modest means face limits to their economic mobility because of sky-high tuition levels.

The monthly CPI number released by the Bureau of Labor Statistics is the standard measure of movement in prices for a wide range of products, but some economists disagree on the figure’s methodology and usefulness.

This metric is key for determining the poverty level and cost of living for seniors who receive government benefits. If the CPI compilation were modified, benefit levels would change.

“There are a bazillion different price indexes measured by U.S. statistical agencies,” said Adam Hersh, senior economist at the Center for American Progress. “The CPI is one particular grouping of prices that puts together a representative sample of the kinds of things most consumers buy, roughly proportional to what they consume.”

But, Hersh said, “the things seeing fast increases in price are taking up more and more of peoples’ incomes in the middle and lower income range — primarily housing, health care and education.” The impact of price increases is considerably underestimated for many Americans, he added.

However, other economists believe that the CPI overstates the real rate of inflation. Allen Sanderson of the University of Chicago falls into this category yet acknowledges that college students as a group “don’t consume the typical basket of goods” and therefore their spending on “education and communication is not adequately included.”

He said that since 1984, college tuition has become close to six times more expensive, “whereas the average good is just double.” He added that in the CPI’s view, “for typical America, that [tuition] represents 3 percent of the family budget. But a typical family isn’t sending kids to the University of Chicago or college at all.”

College tuition has risen at least three times the average CPI increase over the past three decades. The full annual price of attending top-ranked colleges — living expenses included — now exceeds $60,000 per year.

U.S. News & World Report recently listed Columbia University as the most expensive for this undergraduate academic year. While the total cost of attendance with no aid is more $67,000, the half of students who receive assistance pay an average amount of around $26,000.

For public four-year colleges, the highest tuition is in New Hampshire, with the lowest in Wyoming. Across the country, the price of such schools rose more quickly during the last decade than during either of the previous two decades. According to figures from the Department of Education’s College Affordability and Transparency Center, some of the highest increases are among public two-year colleges.

Some experts, such as Richard Vedder of the Center for College Affordability and Productivity, use this underlying reality to criticize the prevailing “college-for-all mentality.”

Vedder, an economist at Ohio University, said, “Our ability as a nation to fund all of this is limited. Over 40 percent of the kids who enter college don’t graduate in six years. Some of those people don’t belong.”

In his view, the high demand for a college degree — 30 percent of the young adult population has one — has driven the high prices. “This is more than [the number of] good jobs that there are in America. We still need people to be auto mechanics, bartenders and taxi drivers,” he said.

Vedder attributed part of the problem to students “in the bottom half of their high school class who don’t get into good schools, major in a subject for which there is little demand in job market and who borrow a lot of money … These people are high prospects for financial failure.” He favors reduced enrollment, which would theoretically help cut college prices and force universities to economize.

Regardless, enrollment continues to climb and now stands at about 18 million Americans. To finance higher education, about two-thirds take out loans and then leave school with debt. The overall student loan burden exceeds $1 trillion, even more than the country’s credit card debt.

With a risky financial aid climate and mounting levels of student indebtedness, many analysts are questioning whether college is worth it. Some ranking systems use the net college price, after aid is factored in, to determine true value. Georgia Tech, the University of Washington and the University of North Carolina top the recent CollegeCalc ranking of academic quality by “the highest return on education dollar investment.”

Using survey data from compensation information company PayScale, prospective graduates can see hypothetical lifetime income expectations for each level of educational attainment. At present, about half of recent college graduates are unemployed or are employed part time, and a majority of unemployed Americans have attended some college. So is higher education overvalued?

“You’ve got to do everything you can to talk your kid into going to a school that’s right for your budget,” said Zac Bissonnette, the author of “Debt-Free U.” “College that leaves him with too much debt and … ruining your life is a really bad way to learn.”

The bottom line is that tuition — which is going up about 4 percent per year — increases at about twice the rate of inflation, though the two are not directly correlated.

Some of the culprits blamed for such high prices are lack of government support, bloated university bureaucracies and relatively high student loan interest rates. Other common targets are fancy campus amenities, unproductive faculty members and subsidized sports programs.

Natalia Abrams, founder of StudentDebtCrisis.org, said the need-based federal Pell Grant program for low-income students is a crucial part of the solution. “We need to realize that financial aid in the form of loans is not really aid at all. We need more grants,” she said.

“There’s no reason to take on excess debt if you can’t see the value of it,” she said, citing “overhyped degrees,” and added that college counselors should help teach financial literacy.

“But this shouldn’t turn people away from college either,” she said. “It’s not just to get a better job. [Higher education] is a civic good.”

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