It’s a conversation between Paul Gigot, Naomi Schaefer Riley, and Dan Henninger regarding the cost of college, who’s in charge of making it cost so damn much, and the three-year-degree option. It’s buried three conversations down in the transcripts, so I’m posting the conversation in its entirety.
Also, when I tried to narrow it down to just the really good, informative chunks, ninety-nine percent of the conversation made my slapping hand twitch, so I figured it needed to be posted in complete form. Not long, not boring, and full of jaw-clenching tidbits about the Orwellian state of higher education. (Spoiler alert: They’re all bastards.)
Gigot: It’s a trend that most parents are keeping an anxious eye on: the skyrocketing cost of a college education. According to a new report by the College Board, those costs continued to rise last year despite a 2.1% decline in the Consumer Price Index. Hit hard by state budget cuts, four-year public colleges raised tuition and fees by an average of 6.5%, while prices at private colleges rose 4.4%. Add room and board, and the average cost of attendance at a public four-year college is now more than $15,000 a year. At private colleges, the price tag is $35,000. The sticker shock has led some, including Tennessee senator and former education secretary Lamar Alexander, to push for a three-year degree program at the college level.
We’re back with Dan Henninger and Steve Moore. And also joining us, The Wall Street Journal’s deputy Taste Page editor, Naomi Schaefer Riley.
Naomi, why do college costs keep rising even if the price level doesn’t for everyone else?
Ms. Riley: Well, it’s a third-party-payer system. I mean basically what you have is, colleges know they can keep raising the price, and they know that the government, through financial aid programs and various grants that they give to universities, both public and private, is basically going to pick up the difference. Unfortunately, for middle-class parents, it doesn’t always work out that way. They’re not picking up all of the difference for them, but colleges keep raising the sticker price.
Gigot: Because there’s income limits on who gets the subsidies, but the subsidies are vast–I mean, the Pell Grants, direct grants for people. There are basically subsidized loans, and then there are subsidies for saving for school too, which is how a lot of middle-class parents help. Are you saying there’s a kind of chasing-your-tail quality here? The tuition goes up, subsidies follow, and then the people say, tuition can go up again, and then subsidies have to go up again?
Ms. Riley: That’s absolutely true. And then in addition to that, you also get a kind of arms race among the colleges. I mean, you get a situation where, first of all, it turns out that parents think the college is better if they raise a price. So if you see a $50,000 cost on college–which by the way, happened this year.
Gigot: Where is that?
Ms. Riley: Middlebury College. It costs $50,000 for tuition, room and board.
Gigot: In Vermont.
Ms. Riley: Yes, for this year. Vermont, you know, a very high-cost-of-living state. And, you know, but parents see that sticker price, and they assume, “Oh that must be a great college education.” So, you know, it’s–all of the wrong incentives are in place. And then colleges are spending money on things like landscaping and fancy food programs and Wi-Fi in the bathrooms and, you know, it’s really hard to sort of figure out where the quality is.
Gigot: I have a hard time imagining. I barely used a PC, Dan.
Henninger: Well, you know, it’s going to get worse, Paul. The College Board just reported that private loans last year for college dropped by 50%, while the public federally subsidized loans rose 15%. Now, we also know that the Congress has taken–is going to disadvantage the private loan program, which means that the federal program is–
Gigot: They’re going to put it out of business.
Henninger: They’re going to put it out of business, right, which means that basically colleges are going to become a wholly owned subsidiary of the federal government. You will never get countervailing price pressure under those circumstances.
Gigot: All right, Steve, is this going to lead to you want to go send your kids to college for only three years?
Moore: Well, you know, Paul, I have an 18- and 16-year-old. I’m listening to these prices that Naomi’s talking about and I’m going to need a big fat pay raise, or else my kids are going to be with me another four years, which is a nightmare.
But look, this is a real issue. It’s going to cost now $200,000 to put a kid through college. You have to start asking yourself the question, “Look, I’ll give you a $200,000 check. Maybe that’s a better way to start your life than going to college.” But Naomi put her finger on the problem. The two areas–I was looking at the inflation rates in health care and education–both of those have booming costs. Education costs have gone triple the rate of inflation over the last decade. And it’s because the people who are getting the service aren’t the ones who are paying for it, and that leads to exploding costs.
Gigot: Naomi?
Ms. Riley: Yeah, I just want to say something about the three-year college costs. You know it’s funny, if you go back to the 1970s, which we’ve been thinking about a lot lately, a lot of colleges actually reduced the length of their semesters, and they said this was to save costs for parents. But of course, the semesters stayed shorter, so kids got less education overall. And the prices never went down. So I think you also have to kind of take these big ideas from schools about saving you money with a grain of salt.
Gigot: The likelihood is that they’d find a way to charge the same amount anyway, even if you only went for three years.
Ms. Riley: Exactly. That’s exactly right.
Henninger: But you get a year earlier to start work and pay back those loans.
Gigot: That would be the benefit. It’s an opportunity cost would be lower. But Dan, the government is going to–isn’t going to change any of this. If anything, they’re increasing the subsidies. they want to make Pell Grants an entitlement. Right now, it has to be passed with annual appropriation. They want to make it automatic.
Henninger: Yeah, and, you know, there is a social aspect to this as well. It’s pretty well proven that the payoff to a college education is higher lifetime earnings. The demand for college now is tremendous. People are just going to these colleges. Probably what we need is either online colleges or more colleges to meet the supply.
Gigot: But which college doesn’t necessarily help, does it?
Ms. Riley: No, no. There are a lot of studies that show, if you are a person who got into both Harvard and, say, the University of Arkansas, and you chose the University of Arkansas, your lifetime earnings would not be that much different. Of course one solution is just improving K-12 education.
Gigot: That would help enormously. And you might get higher returns on people who then don’t go to college or go to community colleges.
Ms. Riley: Yeah, the way it used to be.
