

Higher education

The college-cost calamity

Many American universities are in financial trouble

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Readers' comments



Very good article. Four year universities have out lived their usefulness. Online universities are much more capable f handling the task of education. They provide the most up to date learning experiences for this world. Senator Harkins bad mouthed the for profit institutions in an article that he published mush to the favor of brick and mortar non for profit institution. The $100,000 plus dollar tuition payment is outrageous.

simon says

In 2009 at an honors student dinner at Clarkson University (a private tech school in NY) which my son was attending, I happened to be seated at the same table as the university provost. I asked him how much longer colleges could continue to increase tuition and fees faster than inflation before it would simply be better of kids to just learn a trade and use the money their parents and/or they would shell out to capitalize their own self-employment. He went on to spew the usual education industry talking points about how I just didn't understand the situation. The summary was that even if future students did what I suggested, it would simply over suppy the market with tradesmen, thus reducing their value and making college a better bargain. So the basis of his argument seemed to be that colleges can keep the relative value of a college eductation high because by charging higher real prices they will force more people out of college and thus drive wages for the great unwashed masses down.

Of course, this argument comes from people who, as employees of colleges, typically have a benefit where they and their children can attend the university at which they are employed or any of several others with reciprocating agreements at a cost 50% to 100% below that charged to those of us who work for living.

Well, as with nature, in economics you can sometimes stretch a law pretty far, but you cannot break it. When the cost of college outweighs the benefits, alternative solutions will be found. You would think that if the people heading colleges really are our best and brightest, they could figure that out. But there's no end to the human ability to place desire ahead of fact.

Proud 49er

If the college bubble is to burst, can it please do so before 2028, when my first will graduate from high school?


While the discussion is both informed and interesting, in my opinion it misses a critical point: the reason that university education in the United States became so essential for advancement was the long term decline (from sometime in the 60s, at a guess) in the quality of secondary education.

The Federal government doesn't pour anything like the sort of money into high school education, which, by law, impacts ALL citizens, as it does to higher education, that, by definition only impacts a subset of the population. Rather than creating an education "bubble" in the 22-25 year old demographic, the goal should be every student at the age of 18 should be educated to the level necessary to be a) self supporting and b) an informed voter/member of the public.

Federal money and national education standards are an appropriate way to address the secondary education gap. That money should come out of the money being thrown, often carelessly, at higher education. If that means fewer university students, but better educated high schoolers, that seems a tradeoff well worth making.

Rob S in reply to micol

Many employers use a college degree as a screening test for entry level jobs. Why bother interviewing HS grads, who might be entirely capable of working as a bank teller, shoe salesman,... when there is a pretty good chance that he/she will need remedial training, and there is a college grad available that (usually) will have an adequate education? And they will work for the same salary? The unlucky college grad has paid $100K (+/-) to take a screening test.

The pitch that college grads make more money than HS grads is a self-fulfilling prophesy


What is usually missing from discussions of the rising cost of tuition at public universities is reference to the decrease in support from the state. Where 2/3 of the cost of a college education in Missouri used to be absorbed by Missouri taxpayers, now the portion is 1/3. The difference is made up through increased tuition. This pattern has been repeated across the country.

Rob S in reply to JennyRobins

No, Jenny,

What is missing is a discussion of continued growth in the total cost of a college education, public and private. These costs have outstripped the ability of taxpayers to cover them, in the case of public universities. Costs will continue to climb as long is more money is made available.

Richard Michael Abraham

TOP Not-For-Profit Colleges Only Accept 12%-30% of The Applicants

"Since top tier, second and third tier colleges and universities only accept 12%-30% of the applicants, these colleges rightly believe enough wealthy U.S. parents and wealthy foreigners exist. So far, they've been right."

Richard Michael Abraham www.redii.org


Colleges are a dying concept. There is no use for libraries with robots that fetch books when an entire library can fit on a regular hard drive. Other than a few good professors that are really passionate about teaching, most professors just deliver content. These days content is free and going into debt to have access to free information is insane.
Within the next 10-20 most of the colleges that are around today will either go bankrupt or close down due to lack of funding / interest. The only universities remaining will be top brand names such as Harvard, Yale and major research instituions.

Did you know…

"Higher education has not delivered extra value to match the extra costs, he says."

I graduated in 1980 with roughly $13,000 in loans. I was making about $16,000 my first job. My son (if he goes to private school) will come out with about $125,000 of debt and will be lucky to start at $25,000. It's almost like credit card debt.

Goldman Sachs is making a killing on this... no wonder because they bribed Congress for federal guarantees on student loans/fees and of course the 'no default on student loans' thing Congress passed. The Vampire Squid is sucking all the money out.


The Higher education calamity is that many students have to prostitute themselves or endure a life-long poverty to pay off the student loans.

CnKQ7pSia6 in reply to happyfish18

The average student debt when out of college in the US is around $21,000. That's it. Its about the amount required to buy a decent car. The difference in value between those two in the long run cannot be overstated. Life long poverty? - Most students in the hard sciences pay that off in a matter of two years.

But right out of college, if you want to buy a fancy car, iPad, live in a cool neighborhood and all, as many young people do, then its a different matter. People have forgotten what it is to have patience to earn their way to life's material luxuries.

Maggoty in reply to CnKQ7pSia6

Three questions for you sir,
1. Are you taking into account interest paid while paying down the loan(s)?
2. Does this statistic include students who did not for whatever reason need a loan?
3. How is any one student supposed to pay off debt when we have the highest unemployment for college graduates in recent history?

I think people graduating college would be happy with a job in their chosen field, an apartment, and if public transportation is not available, a sensible low cost vehicle.

I might know something about wanting fancy things right out of college, as I'm a college student somewhat near to graduating. Loans aside, one of the most frustrating things I've seen is bright students being forced out of college by rising tuition costs while rich kids party in frat houses. There is a very real social and economic price we will pay in the next few generations because of this.

Bugs10 in reply to CnKQ7pSia6

That's the average. The average is brought down by the students who just need a small amount to supplement parental funding. The college I went to now costs $54K/year. Even if you only needed to finance half of it, you'd owe over $100K plus interest. Yeah, don't forget the interest!

Then there's also graduate/professional school. If you're not in a PhD program, this is really expensive. Most graduate students don't have parental funding. And you now also have to finance living expenses if you're not working full time. Seven years ago, my 2-year program cost $50K, I had $12K in a research fellowship and took out a total of over $75K to pay tuition and living costs. I had a (low) paying internship over the summer, but my program didn't allow students to work off campus during the academic year. I was in my late 20s at the time and I'm paying off my loans just for these 2 years over a 30 year period (I think, I actually don't even know) and my monthly payment is $625-for two years.

I know that students weigh the costs and benefits of choosing the most respected program they can get into vs. financing options, I'm just saying student loan payments ain't cheap. And for many 20-something students, it's just a part of life. You want and need to go to school, you want to make the most of it and go to the best program you can, and you figure everyone you know has student debt--it's just something you do.

In addition, the government and SallieMae and any of these other student creditors make understanding the financing virtually impossible. They use langauge that doesn't even exist outside of the realm of student loans. Nobody understands it fully, it's worse than mortgages. My younger brother, in his late 20s with a challenging job, starting a top-notch science program, graduated from an Ivy League school-- he calls me up and says, "Do you understand any of this student loan stuff?"

Rob S in reply to happyfish18

They do not "have" to do anything. College debt is discretionary. In a large fraction of the cases, it is clearly a bad investment, up front.

If you borrow money to spend on a college education that will never provide you with the tools to make it possible to pay it back, go ahead. But quit whining about the cost.

Cool Beans

The thing that will keep many of these universities afloat, and hence keep pushing costs up are rich kids from emerging economies whose parents are able to afford such exorbitant prices and the numbers only seem to be growing. Good universities are popping up in their home countries too, but the best still tend to be in the US, UK etc. so it may very well be the case that the proportion of foreign students rises as fast as the costs of tuition

In the long run in reply to Cool Beans

It's already happening. Univ. of WA has one of the highest proportion of international students (18% of last year's Freshman class are foreign, half are from China). In-state residents pay $12k a year in tuition and fees, out-of-state and international students pay $30k a year, plus another $10k a year for Room & Board. Even our community colleges are now increasingly filled by foreign students, their tuition costs $9k/yr, about 3x more than in-state residents.

With the state budget cuts, UW is increasingly turning to foreign students to help plug the budget shortfall. Admissions for native Washingtonians has become so competitive that in-state parents are starting to offer to pay the UW out-of-state tuition to fight for a spot! I think that's just wrong. State universities are largely funded by taxpayers. They need to figure out how to cut cost rather than offering ever more spots to foreign students while leaving our own students out in the cold. Let the foreign students go to the private universities, or at least charge them 5x more than in-state students!


I find the cost of universities in America to be outrages, and it's not surprising that they're debt ridden. Here in Canada, the provinces support the univserities and as for the universities there isn't excess spending in unneeded areas, just upgrading. I go to U of T and the cost is only around 6-7K/year compared to America's ivy league schools which apparently go up to 50K/year. Of course there is the difference between provinces' support, a Quebec student only have to pay 2-3K.
As for which degrees are useful, STEM vs. liberal arts. STEM subjects are about solid facts i.e. 2+3=5, where as liberal arts is more about forming your own views with solid facts to back them up. You can't really say that one's more useful, it's more of what's more in demand.
Not every degree has a solid career path, I have to disagree since it's what you do with your degree. Although some like philosophy or gender study could only stay in academia. But the mentality of one kind of degree is better than another, engineering vs. sociology maybe true to an extent, but then again not everyone's engineering material.

Sentinelese in reply to Lotus_Maiden

Mingze Xi and Guagua Bo can afford to go to Harvard but I don't think they are studying STEM (although Mingze's dad Jinping was trained as an engineer, no?). People who have money, don't have to talk about money and it seems that a lot of Universities in the US are trying hard to recruit "rich" students from China just to make a quick buck. Canada might be doing that too. The market for foreign students, especially from India an China, is pretty large (there are almost 3 billion Indians and Chinese altogether on planet earth), so American and Canadian Universities might tap into that potential. They are actually also setting up campuses in India and China, I heard (are Canadian tax-payers supporting that too?).
MONEY is the METRIC. Who cares about what students learn or whether they get jobs or pay back their loans. Once they graduate with a degree the University is no longer responsible for them. Let the MARKET FORCES determine their fate.
Long Live the True Spirit of Capitalism in Universities!
Down with Evil Socialism!
Up with Tuition Fees!

acadso in reply to Sentinelese

"Who cares about what students learn or whether they get jobs or pay back their loans."

Do you really think it's healthy for the economy to have an entire generation that is poorly educated and crippled by debt? Who cares about market forces if the quality of society is sacrificed?

Rob S in reply to Lotus_Maiden

"useful" is a subjective concept, Lotus, and difficult to quantify. However, the burden of a student loan and the ability to repay it is quantifiable.

Your justification for studying liberal arts is a familiar one. The latest buzz phrase that covers this pitch is "critical thinking". I really have not seen evidence of this skill any more evident among those trained in liberal arts than in physics or engineering -those fields also demand skills in critical thinking.

The focus here on the financial aspects of an education should force us to consider the finances when we make a choice for an education major. And if we choose to follow a path with a poor financial return, so be it. And accept the consequences.


The "bubble" is due to easy credit, like all the other bubbles, and a few being allowed to treat education as a money maker. That will have to be fixed. The other critical issue is the severe cutback in state-funding for state universities, which is a travesty.

LexHumana in reply to longvie.ws

The bubble may indeed be due, in part, to the ease of obtaining student loans. However, we asked for it -- the public demanded that the government provide such public assistance, and the democracy responded by giving such public assistance on very generous terms. The consequences are of our own making.


Lets shatter some perceptions and misconeptions shall we. Something that The Economist should've done?
According to this: http://blogs-images.forbes.com/troyonink/files/2012/01/collegechart.jpg
Yes, Liberal Arts majors are at 9% unemployment but far less than Architects, and BARELY better than that Computers and Mathematics at 8.20%.
Or more interesting: Education seems to be in the greatest demand and suffering the least unemployment. FAR less than Engineers, Law, and the Sciences combined.

CnKQ7pSia6 in reply to GSamsa

A couple of things worth pondering -

Firstly liberal arts majors make less than computers, math or engineering majors. Way way less.

Which brings one to the second point - how is employment defined here? Several liberal arts majors may accept jobs as waiters or shop assistants, for example. That would count as employment, wouldn't it? But its not really related to their major at all.

CnKQ7pSia6 in reply to Gregor Samsa

Your point is partly valid.

One cannot ignore the massive difference in salary between the hard and soft sciences.

If a substantial number of liberal arts majors were in business fields, the average salary wouldn't be so low. Given the fact that there are only so many liberal arts jobs on the market, the majority of these majors are clearly getting employed in low paying jobs.

"Transferable skills" are honestly speaking, a euphemism for "less in demand" skills. Think about it - the highest paying jobs are those that require a very high degree of specialization and have low transferable skills. What are the top paying jobs ? - at least 5 of the ten top ones are those in medicine or surgery.

Now what transferable skills does a radiologist earning $400K a year have? How about a corporate attorney, physicist or a computer scientist? Heck, what transferable skills does even a top sportsman or actor have? Specialization is king. You do something that the market demands and you do it really really well. Jobs with a high "transferable skills" index are generally never at the top of the food chain.

Gregor Samsa in reply to CnKQ7pSia6

True, but business majors often have fairly broad (transferable) skill sets. In terms of economic value, specialization has higher returns, but I wouldn't assign liberal arts majors zero economic value. In fact, there are certainly corporate attorneys and CEOs with liberal arts backgrounds. And the cultural value is certainly important, wouldn't you agree?

The problem with taking a purely economic stance on education is that arts and humanities degrees would naturally be limited to the economic elite. Excluding the middle class from cultural discourse in academia would seem to widen cultural barriers. Not everyone is cut out to be a doctor or engineer, but I would rather see more people with liberal arts degrees than fewer.

I think the heart of the problem has been that the proportion of financial aid available in the form of grants versus loans has gone down. With all of the freely available student loan money available, schools have gone on a spending spree, driving the cost of education through the roof.

The result is that, as you note, the price for a liberal arts degree is no longer economically worth the cost. If you are middle class, the cost is even greater because you don't have the benefit of grants. Add to that the fact that your parents are on the hook for your education, (i.e., you can't be considered independent for aid purposes until you are 24, yet there is no corresponding tax break for you as a dependent), and the middle class is all but completely priced out of liberal arts.

And then there is that old chestnut, that you need a college degree to get a job. Now that the market is flooded with people with degrees, it doesn't seem to provide an edge unless it is specialized, as you say. But what is the alternative? You still have a better shot at an entry level job at most corporations with a degree than without, unless you go into food service or the like.

In the long run in reply to CnKQ7pSia6


They can always go work at Starbucks or drive a UPS truck, which makes their skills as "trasferrable" as LibTard majors. Just because most of them don't choose to ask "Do you want fries with that?" doesn't mean they don't have the "skills" to do so.

In the long run in reply to Gregor Samsa

"In fact, there are certainly corporate attorneys and CEOs with liberal arts backgrounds."
-- I think most only became corporate attorneys or CEOs after going on to grad school to get a JD or MBA. There may be some without a technical degree or MBA, but they are few and far between. I don't count undergrad business degree as LibArt, Harvard does not offer undergrad Business as a major.

Of course there are values in liberal arts classes. However, taking a broad range of classes in LibArt to expand one's horizon and complement a technical degree is different from majoring in LibArt. LibArt majors tend to be generalists, expert of nothing, the blank slates. Corporations used to hire them as trainees to do low level office jobs from admin to bank tellers, HR assistants, claims adjusters...but the combination of automation and outsourcing has done away with a large chunk of these jobs. So now you either have to study computer science to automate more of these jobs, or you can go work at Starbucks with a libart degree. This modern economy has turned Liberal Arts into a degree for the idle rich. More people need to recognize this new reality.

Gregor Samsa in reply to In the long run

My reference to business majors was about transferable (read "general") skills, in regards to the argument that specialization is always more lucrative than generalization. I was pointing out that many business skills learned in school are general skills.

As far as the attorneys and CEOs with liberal arts backgrounds, yes - it's their undergrad degrees I was referring to. Attorneys often have philosophy, for example, as their undergrad degree, which is one of those esoteric degrees that people like you seem to feel is useless.

Your point about the liberal arts being a degree for the idle rich was a point that I'd made, but in a negative way. Liberal arts degrees can confer education more as it used to be, i.e. classical education that included art, literature, etc. The purpose of an education versus professional training is to teach people how to think. We no longer get that in school, and without liberal arts in college, even majors, God forbid, would be a huge loss to our culture.

CnKQ7pSia6 in reply to Gregor Samsa

Gregor -

You make several good points there and I agree with many.

Paradoxically enough, one of the reasons I'd rather have fewer students graduating in subjects like philosophy or art than the practical sciences is the amount of intellectual rigor, creativity and natural talent required to succeed in these subjects. A mediocre engineer or doctor still has much productivity for society. Yes a brilliant engineer will invent new machines but an ordinary one will at least build bridges. Same with a mediocre accountant or doctor. But an intellectually mediocre philosophy or art major is virtual deadweight. He certainly won't make any significant contribution to his field, he can't even produce anything of everyday value to society in his field. In my opinion it is only the truly gifted who should go for these fields.

Now this does not mean that students should not take courses in them. Far from it. I think the liberal arts are a vital part of a good all round education. But there is a difference between studying history in high school versus choosing to major in it. In an ideal world we'd all get to study as much of everything that we liked but there are a limited number of years in a man's life, a limited number of funds and citizens in a state. The more liberal arts majors you produce, the lower the proportion of engineers and hard science graduates you're going to have. That is simply plain math.

The question is striking the right balance. I personally don't think the government should make judgments on how many biochemists vs. artists to produce except in funding basic research. The market determines that best of all. This does not however mean that some kid who could've been a great artist will not make it because he's from a poor family. If he is confident enough about his talent and that society will appreciate and buy what he produces, he can take a loan and fund his studies. But you simply cannot fund too many students for too long in the hope of preventing one potential Mozart or Rembrandt from falling through the cracks in the system. Because you will then be letting even more Edisons and Einsteins fall through. Its always about trade offs since there is no perfect solution in a world with limited resources.

Analyticity in reply to CnKQ7pSia6

I agree with everything you said, CnKQ7. Unlike accountants or engineers, there are very few mediocre philosophers employed as philosophers. A four year degree in the liberal arts is fairly useless by itself as far as procuring good employment goes. The only specialized jobs available for most liberal arts degrees are jobs in academia, which are extremely difficult to obtain. I am currently wrapping up an MA in philosophy at program ranked in the mid-20s among American universities. 300 people with philosophy BAs and/or MAs will apply for five funded positions at my program this fall (myself among them). Those who are admitted and earn their PhD 5-7 years later will have something like a 25% chance of finding a tenure-track job in academia. The employment prospects improve with higher ranked programs, but even at these schools a PhD is no guarantee of employment. It was not for nothing that some of my conscientious professors in undergrad gently cautioned me away from the academic track. So, unless you are prepared to chase academic excellence for at least 5 years of graduate school (the MA by itself is fairly useless) a four year degree in the liberal arts is a terrible investment. A minor in the liberal arts, or a double major paired with a more marketable degree might be worth pursuing, but if you can't hack the high-risk, long-haul academia route, stay away from the four year degree.

Gregor Samsa in reply to CnKQ7pSia6

I agree for the most part, but as the market is deciding it now, there are too many mediocre students of all types, thanks to student loans. Perhaps vetting students better by having qualifying exams in high school beyond the SAT/ACT exams, like they do in Europe would help. It would be more like GRE exams, where you have to qualify in specific content areas. But then that would be government limiting the liberal arts degrees. Also,limiting liberal arts degrees would be limiting degrees. An English major might not have the math or spatial abilities to become even a mediocre engineer, so excluding him from a English degree because he is not the best of the best might prevent him from getting any degree.

In short, striking a balance might be difficult without government intervention, unless we do away with student loans altogether. Of course, that might not be a bad idea, since lower demand would drive tuition prices down. Remember when junior college was free?

Rob S in reply to Gregor Samsa

Liberal Arts was once before a degree for the idle rich. Those who were looking for upward mobility entered fields such as pharmacy, animal husbandry,..

It will come as a shock, I suspect, Gregor, but students who study fields not related to the liberal arts also learn how to think critically, and how to apply their thinking to problems in a effective manner. That training in application of critical thinking to real problems that have measurable consequences (will an airplane crash?)is what is missing from a Liberal Arts degree.


The article fails to account for how much education is provided for the price.
There's more and more material/knowledge that has to be taught/learned. Whatever some studied 40 years ago in 2 years for $500 (hope the sum is in the ballpark for 12 cr. hrs.) is now condensed to 1 semester for roughly $300 (assuming $100 per credit hour for a 3 cr. hrs. course).


In my opinion Uncle Sam should cut its costs of defence and put more into higher education.

What really maks one conquer the world is not military force ,it is its education thoughts.

And the US should mind its own business,not that of the world.

CnKQ7pSia6 in reply to zmjh

Uncle Sam already spends more than any other developed nation on education (both in aggregate as well as on a per capita basis). In higher eduation, even the top state university (UCal Berkeley) which has substantially lower fees than private universities has a much higher drop out rate. So money is clearly not the issue. It is precisely the government largesse accompanied by little to no accountability that has led to such poor results despite such high spending. So cut out the "put more into higher education" mantra.

I can understand if you feel the need to rant against unnecessary military adventurism, but please try and not forcibly inject that into discussions where it has little to no relevance.

As for the US minding its own business, I bet whichever country you live in, you'd feel very differently if Iran blocked the Straits or Hormuz or China blocked the South China seaway tomorrow. Or for that matter, if you were a West German during the cold war or a South Korean next to a maniacally murderous regime today. If people think so much that the US should mind its own business, why then this bipolar behavior where they keep calling on it to solve problems? The latest one is Syria, before that it was Libya, before that Egypt, and before that the protests in Iran.

Don't want the US to get involved? Fine. Just be ready to lose the good along with the bad. There won't be any more unnecessary wars like Iraq but there will also be nobody to rescue defenseless women from being raped or men from being butchered in places like Bosnia.

Rob S in reply to JM3

Countries that provide free higher education (usually to a smaller fraction of their population) still spend far less per student than the US does.

Why do you suppose this is the case?


IMHO all the best professors - the ones that actually want to educate - are starting to teach classes online anyways.

The university system is as outdated as the textbooks they use to teach with. Dinosaurs trying to preserve the nest egg.

I'm an engineering major myself, and I look forward to continued industry disruption.


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