A State University Tuition Bubble?
NEW YORK ( MainStreet) Could we be in the midst of a state university tuition bubble?
Sure looks that way. Like houses in 2007 or tulips in Amsterdam circa 1637, public university prices are rising dramatically -- with an increase much sharper than that of other post-secondary institutions.
Since 2000, four-year public schools have increased their tuition a whopping 87%, almost twice as much as private four-year schools or two-year community colleges, according to data from the College Board. That's a marked change from 1972 to 2000, when public and private university tuition rates increased at roughly the same rate.
The increase was largely the result of the fact that states with revenue battered by recessions in 2001 and 2007 to 2009 cut spending on higher education and universities increased tuition to get college students and their families to pick up the slack.
"States have been shifting the costs from the public to the student," said Rita Kirshstein, managing director at the education program at the American Institutes for Research. "If revenue plummets from state appropriations...schools have to get it from somewhere else."
And that "somewhere" has been tuition.
Community colleges were largely insulated from state cuts in part because states have increasingly used community colleges to "remediate," or provide college-readiness courses to, students who plan to head to four-year schools, said Rafiq Dossani, senior economist at the Rand Corporation. About 40% of four-year public university bound students take those classes, and they're much less expensive for the state to subsidize at community colleges than at state schools, he said.
The state university cost shift is a relatively new phenomenon. There were recessions before 2000, but those recessions didn't lead to steeper increases in public compared to private university tuition.
The difference, said Terry Hartle, senior vice president of the American Council on Education, is that over the past two decades there's been a "fundamental" shift in the way Americans view education.
"Increasingly as people see higher education as a private good," he said. "Over the last 20 years, the public good aspect of higher education has come to be less and less visible."
As students, and not society at large, are seen as the primary beneficiaries of degrees, states increasingly treat them as "paying customers" and allow tuition to rise, he said.
And that's a second major hallmark of a bubble: costs rise, not because a product is worth more, but because people increasingly see it as a personal investment in the future. Students see it as more valuable, so they and (if they're lucky) their families dig deeper.
So is it sustainable?
"Not over the long term, absolutely not," said Hartle.
A shift away from four-year public schools may have already begun. Two-year public school enrollment increased almost 50% between 2000 and 2012, compared with four-year public school enrollment, which rose at barely half that rate. (By contrast, the price difference between public and private schools does not appear to have narrowed enough for students to be opting for private educations, where enrollment increased less than 10% over the period).