Archive for the ‘College’ Category
Better 20 years late than never. American media acknowledges that there may be a link between increased government college aid and rising college tuitions.
The Wall Street Journal reports: “[A] new study found that tuition at for-profit schools where students receive federal aid was 75% higher than at comparable for-profit schools whose students don’t receive any aid.
“The tuition difference was roughly equal to the average $3,390 a year in federal grants that students in the first group received.”
I reported on this obvious economic result a few months ago. When the government implicitly tells colleges that it will subsidize tuition increases, for-profit and non-profit ones alike will generally increase tuitions.
A spokesman for Education Secretary Arne Duncan–who heads an agency that is hostile towards for-profit colleges–admits that for-profits take advantage of the government’s generosity, but that non-profits are completely different.
The distinction between for-profit schools and non-profit schools is a technical absurdity. Columbia University and ITT Technical Institute both want to maximize their income. The difference between the two is that Columbia reinvests all profits in the university while for-profits such as ITT can distribute their profits to management.
All Columbia administrators, faculty, and staff have defined salaries independent of how much revenue the university collects. This is generally how any non-profit works. Unlike a restaurant owner, the director of a non-profit does not keep any of the left over revenue (profits). But Columbia, like any non-profit university still wants to maximize that left over portion.
Whereas ITT may distribute some profits to its management, Columbia will invest in its endowment, pay for numerous extracurricular (or non-curricular) events, increase salaries for coming years, etc. Both schools want to maximize revenues and minimize costs. They just spend the difference between the two…differently.
According to the WSJ, the authors of the study that motivated its piece say that non-profits “are different because they aren’t motivated by profits”.
From Columbia to Emory to Rice, non-profits are just as pro-profit as for-profits. How else do you explain $50,000 tuition?
Did it always used to be this way? Up until the last several years, was the cost of textbooks a serious cost that families had to account for? I really don’t know and I’d love to ask adults of my parents’ generation this question.
At Tulane, the market for used textbooks is so profitable that there are three separate book buyers within about a 50 foot radius just off of campus. The $5.5 billion college textbook market is amazing. $5.5 billion?! If students bought all the required college textbooks from the campus bookstore, and didn’t look for used or previous editions, the bill every semester could easily come to at least $700.
This article gives some interesting explanations. Writing this quickly on the eve of Sabbath, here are my back of the napking theories:
- Professors who require very specific books for their classes help drive up prices. If your professor convinces you that it’s only possible to do well if you have a book with this specific ISBN number, then most of that class will buy that book. If their parents are footing the bill, as the above article points out, then you have the 3rd party payer problem. The person receiving the benefits (the student), doesn’t really care how much the book costs.
- My guess is that fewer students today work their way through college than did in the past. Parental financing, government loans, and generous financial aid and scholarships are some reasons. If the students were paying for the textbooks, very few would ever buy a full-priced one.
- Maybe, maybe there is some level of collusion between publishers and colleges. I have no proof of this but if it existed, it would make sense. The hypothetical scenario would go as follows: Publisher tells Finance Department that Publisher wants to release the 11th edition of a book. If Finance Department makes the 11th edition (which is barely different from the 10th) the required textbook, Publisher will do something for Finance Department.
Have a restful weekend! If you don’t observe the Jewish or Christian Sabbath, I highly recommend doing some type of secular Sabbath…perhaps turning off your cell phone for 24 hours?