The Increasing Costs Of College
If you're looking for an expenditure that consistently outpaces inflation, just apply to college. The laws of supply and demand have sent tuition prices into the exosphere, and they don't appear to be decelerating anytime soon.

A few generations ago, college was a means for transforming the progeny of the elite into doctors and attorneys. Today, college has been democratized to the point where attendance is seen as almost mandatory - a seamless continuation of one's high-school years, undertaken for the presumed purpose of increasing the student's eventual earning power. Forty percent of Americans between the ages of 18 and 24 are attending two-year and four-year colleges. That's a two-thirds increase over 1973's percentage, when unemployment was lower than it is today. (To help you choose schools, check out Top Colleges For Your Tuition Buck.)


TUTORIAL: Student Loans

The colleges know it's a seller's market, and they're responding by raising prices as high as the market will bear. To quote the College Board, over the past decade: "published tuition and fees for in-state students at public four-year colleges and universities increased at an average rate of 5.6% per year beyond the rate of general inflation."

It doesn't take a sophomore mathematics major to calculate that that means about a 72% increase in tuition since 2001 in constant dollars. In California, tuition increased 21% at public four-year colleges, 37% at their two-year counterparts. That's not over the past decade; that's over the past 12 months.

Across the nation, the median tuition at four-year colleges stands at just a textbook shy of $10,000. That's per year. Prices range from more than $56,000 at Sarah Lawrence College to zero at the United States Military, Naval and Air Force Academies. (Well, zero plus a formal recommendation from your congressman, which isn't easy to get.) In the stock market, or in other marketplaces, no one jumps to pay rapidly increasing prices for a somewhat homogeneous commodity that's available everywhere. But colleges have convinced buyers, i.e. students, that expensive study is the one thing separating them from lifelong poverty.

Printing Money
Those above dollar amounts just get you into the lecture hall. There's also the matter of textbooks, which any college student knows can be dizzyingly expensive. The fortunate English majors can get by with a $5 Penguin paperback copy of "Hamlet," but it's not uncommon for math and engineering textbooks to cost upwards of $200.

The list of reasons for the upward pressure on prices is almost a college-level economics course in itself: the student must buy the book if he or she wants to take the course, there are only a handful of established publishers, the professor often requires the students to buy a book that he or she wrote, and a third party is probably going to cover the cost anyway.

That being said, a recent phenomenon is electronic textbooks available for either purchase or rent. (In the latter scenario, the book appears on the student's reading device for only a finite time.) Amazon is at the forefront of this nascent development, offering prices substantially lower than that of your average campus bookstore, but still plenty high in absolute terms. (To learn more, check out Budgeting While You're In College.)

From Ivory Tower to Strip Mall
Where are students paying this exorbitant tuition and lugging around these costly books? The most profound demographic trend in college attendance is the emergence of for-profit schools. Arizona State University has 72,250 students, making it the largest conventional four-year school in the nation. Six other schools have even larger enrollments. What they don't necessarily have is campuses. Those six schools include for-profit giants Ashford University, Kaplan University and the colossal University of Phoenix, home to more than half a million students.

Is Bigger Better?
Harvard and Yale might be prestigious, but they aren't engines of mass job creation. Along with the for-profit schools, two-year community colleges dominate on the list of schools with the largest enrollments. Miami-Dade Community College and Houston Community College are the most populous in the nation, but in almost any metropolitan area of significant size, the two-year college is going to be the biggest educational institution in town.

Commuter colleges have another advantage over traditional institutions, too. When you're attending the former, you're probably living at home. Campus housing has also gotten more expensive in recent years, though not to the extent that tuition and books have. In a survey of major private four-year colleges, dormitory prices are rising one or two percentage points per year. And if you're committing to go to school in a town such as Champaign, Ill. or West Lafayette, Ind., you're probably committing to living on campus. Giant apartment high-rises are rare in those towns.

Who's Learning What
Earning a diploma or certificate is but one thing. Having it take you places is something quite different. What majors are most popular, and does that popularity translate into increased earnings? The principle of the road less traveled applies in the realm of education, with business, social sciences and history drawing the most graduates. The majors that draw the least interest are computer science/information science and engineering. In 2011 for which we have data, The National Center For Education Statistics reports that 350,000 students graduated with a business degree. Meanwhile, fewer than 40,000 received computer science degrees and fewer than 80,000 completed the coursework to become engineers. Which isn't surprising, given the intellectual demands of those majors' course loads. Once they've left school however, hard-science majors get rewarded quickly.

The Bottom Line
There must be a point at which the increase in college costs outweighs any potential return, but convincing high-school seniors and their parents of that is a tough sell. In the meantime, if you're looking for a quick increase in your earning power, you can pay under $2,000 and learn to drive a commercial truck in less than a month. (For more help, check out A Post-Graduation Financial Plan.)






comments powered by Disqus
Trading Center