2014: Possible Better College Deal for Youth?

Glenn Harlan Reynolds

Glenn Harlan Reynolds is a University of Tennessee law professor and author of The New School: How the Information Age Will Save American Education From Itself.  

 Reynolds has summarized for the Wall Street Journal his book’s call for reduced college education expenses:

University of Michigan economics and finance professor Mark Perry has calculated [that] tuition for all universities, public and private, increased from 1978 to 2011 at an annual rate of 7.5%. By comparison, health-care costs increased by only 5.8%, and housing, notwithstanding the bubble, increased at 4.3%. Family incomes, on the other hand, barely kept up with the consumer-price index, which grew at an annual rate of 3.8%.

the gap between soaring tuition costs and stagnant incomes was filled by debt. Today's average student debt of $29,400 may not sound overwhelming, but many students, especially at private and out-of-state colleges, end up owing much more, often more than $100,000. At the same time, four in 10 college graduates, according to a recent Gallup study, wind up in jobs that don't require a college degree.

Students and parents have started to reject this unsustainable arrangement, and colleges and universities have felt the impact. According to a recent analysis by this newspaper, private schools are facing a long-term decline in enrollment. More than a quarter of private institutions have suffered a drop of 10% or more—in some cases, much more.

To remain viable, colleges and universities need to cut expenditures dramatically. For decades, they have ridden the student-loan gravy train, using the proceeds to build palatial buildings, reduce faculty teaching loads and, most notably, hire armies of administrators

Many colleges [offer] hidden discounts. [F]or the fall of 2013, the average "tuition discount rate" for incoming freshmen (that is, the reduction of the list price through grants and scholarships) hit an all-time high of 45%.

What's really needed [is] to cut expenditures dramatically. For decades, [colleges] have ridden the student-loan gravy train, using the proceeds to build palatial buildings, reduce faculty teaching loads and, most notably, hire armies of administrators . . . administrative bloat [means] administrative staff growing at more than twice the rate of instructional staff. At the University of Michigan, for example, there are 53% more administrators than faculty, and similar ratios can be found at other institutions.

there is no point in trying to preserve the old regime. Today's emphasis [is] on measuring college education in terms of future earnings and employability. . . When you could pay your way through college by waiting tables, the idea that you should "study what interests you" was more viable than it is today, when the cost of a four-year degree often runs to six figures. For an 18-year-old, investing such a sum in an education without a payoff makes no more sense than buying a Ferrari on credit.