AEI - Short Publications - Going Broke by Degree: Why College Costs Too Much

College costs have been rising far faster than inflation for at least a century.
The recent rapid rise in tuition is not sustainable in the long-term, as college costs absorb an increasing share of family budgets.
Costs reflect falling productivity of universities, combined with rising demand for higher education financed largely by third parties.
The inefficiency of higher education reflects its nonprofit nature, the overabundance of third-party subsidies (especially government aid), and the stifling of price competition.
The lack of a clear "bottom line" makes accountability difficult, and few incentives exist for university personnel to use resources efficiently.
Higher costs reflect big increases in staffing, generous compensation payments for faculty and other staff, and increasing spending on noninstructional related activities.
Only about $0.21 of each added dollar of university resources over the past generation has actually gone toward student instruction.
Universities subsidize research and graduate education at the expense of undergraduate instruction and low-income and minority students at the expense of the more affluent.
Greater public spending on higher education is actually associated with lower rates of economic growth and an out-migration of population.
The case for public spending on universities has declined substantially, and even ending government subsidies actually might be desirable.
An agenda to increase efficiency would include giving funds to students, not institutions, in the form of vouchers or scholarships, making them contingent on good academic performance.
Long-term reform might ultimately lead to privatizing state universities.
Piecemeal incremental reforms mandated by governments are likely to lead to disappointing results.
Alternatives to traditional universities (e.g., for-profit schools, on-line instruction, new ways of certifying skills) are growing in importance.