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College tuition: high and made-up

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When private, not-for-profit colleges increase tuition, the government never asks them to explain their numbers. The truth is most can’t.  A tuition increase is a strategic decision reflecting what colleges believe the government and parents will accept, and what other colleges will do. State college tuition is a negotiated number between the colleges and state authorities. Any cuts in state aid usually end up as higher tuition for students. In few cases, tuition decisions are based solely or even largely on the real cost changes a college faces in any given year. 

Most colleges increase tuition every year no matter the trend in inflation. They choose the same level of increase year after year. Their increase matches the increase of all other schools in their peer group or region. A real calculation would be subject to far too many variables to always produce these same results, such as differences in benefit packages, staff union contracts, bond interest, front office salaries, maintenance and more. If challenged, administrators point to college price indices typically higher than the consumer price index (CPI) and of questioned accuracy.

Sadly, most increases earn unanimous trustee approval. In fact, trustees are more likely to question when administrators don’t raise tuition than when they do, seeing it as a missed opportunity to keep up with other colleges. They fear that reducing tuition would be seen as a sign of financial distress.

As parents and students, politicians and policymakers are increasingly demanding that colleges contain costs, what costs are we talking about? The arbitrary ones or the real ones? It is very murky. Unless reformers have a true baseline, it is impossible to tell. 

Why can’t the government ask colleges to submit data to justify tuition increases based on real price movements? It already asks colleges to submit detailed financial information for proof of solvency. If they did, colleges would have to show exact figures. It may even make them reconsider raising tuition. The college price data sent to the government should be signed off by the college trustees.

Colleges claim that it would show their costs for educating a student are even higher than the tuition they charge. But college tuition has risen much faster than the CPI for many years. What is the real cost of educating a student? 

Trustees have abrogated their responsibility over tuition to the college administration. The government must act to instill in them the gravity of being the custodians of taxpayer money. It should do so through trainings, seminars and notifications. Trustees are the owners of the college, after all, not the president who works for them. If the government finds any fraudulent data used by a college to justify tuition increases, the trustees should be held responsible. 

President Biden in his recent announcement granting student loan forgiveness, did mention heightened surveillance of colleges. At a minimum, we should expect that colleges will give us honest numbers. Without this basic tenant, it is hard to imagine that any plan to control tuition costs would produce meaningful results.

Robert Hildreth is a former International Monetary Fund economist whose professional work involved restructuring South American debt and marketing sovereign debt loans. He founded the Hildreth Institute dedicated to restoring the promise of higher education.

Tags Biden College Debt Robert Hildreth Student debt Student loan

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