Economics We Can All Understand

In the fall of 1985, I was a college freshman at a no-name state school in the Pacific Northwest. Tuition was $404 a quarter, or $1,212 a year (fall, winter, and spring). I could—and did—earn enough money in one summer to pay for tuition, room and board (around $2,500 annually at the time), and books for an entire year.

I just looked up the tuition rates at my alma mater: $2,457 a quarter. That’s $7,371 a year. Add the current room and board rate—$9,342—plus about $1,000 for books, and…

  1. Roberto
    Pigboy: It seems to me a simple message about where we went wrong and what we can do to fix it will go a long way toward winning people to our side.  · · 3 minutes ago

    The solution though, the elimination of Sallie Mae and all other federal and state price supports that are massively inflating costs, has so far not been a message people seem to want to hear. 

  2. Pigboy

    Maybe I’m not paying attention, but I have yet to hear a national politician linking the two and making the case. 

  3. Misthiocracy

    Two thoughts:

    1. Instead of asking, “why is college education so expensive today?”, how about we try asking, “why was college education so inexpensive in 1985?”

      I’m guessing people in 1985 didn’t think it was so dang inexpensive, but with the benefit of 20-20 hindsight we should ask,how come the school was able to get by in 1985 by charging so little?

    2. How much financial aid do students at this school get? What is the actual out-of-pocket cost per student, on average? 
  4. Barkha Herman

    The college expenses have risen far more rapidly than inflation, price of the 1985 dollar.

    The underlying reason for it the Government involvement.  Colleges now have staff and programs that were unheard of in 1985.  The thing is, when the Government subsidizes anything, it becomes more expensive.

    It is difficult to convey that in the 30 second campaign speech talking point or in an elevator speech.

    What really would help is “real” economics education for all – such that   everyone understands this.

  5. mark alesse

    The costs have risen because college loans are so easy to get. Eliminate them, and the costs will drop or a lot of colleges will go under. I, for one, would not lament the elimination of a lot of colleges. Fewer jobs for liberal idiots is not a bad thing, particularly when they indoctrinate our kids with leftist nonsense. 

  6. Pigboy

    Misthiocracy: Here’s the data you’re looking for: http://www.collegedata.com/cs/data/college/college_pg03_tmpl.jhtml?schoolId=1161

    Barkha: The problem is, no one can afford “‘real’ economics education” anymore. And I’m not necessarily expecting anyone to make this a 30-second spot; I’d just like someone at the national level to talk about it, period. Why? Because my gut tells me people can relate to it. To tell you the truth, I don’t even know what marginal rate I pay in income taxes. But with a senior and sophomore in high school, I sure as hell know we can’t afford to send our kids to college without going into further debt. That’s a problem that didn’t exist a quarter-century ago.

  7. Pigboy
    mark alesse: The costs have risen because college loans are so easy to get. Eliminate them, and the costs will drop or a lot of colleges will go under. I, for one, would not lament the elimination of a lot of colleges. Fewer jobs for liberal idiots is not a bad thing, particularly when they indoctrinate our kids with leftist nonsense.  · 9 minutes ago

    Agreed. But again, not the best set of talking points for people who would interpret what you’re saying as a way of making college less accessible. How do we reach those we need to reach with meaningful solutions? And what are those meaningful solutions?

  8. Barkha Herman

    @Pigboy:

    I have one in  college, and another one is a senior in high school. Of course, it took some planning, but going forward they will not cost me a dime.

    Here’s a book I bought for my daughter her senior year, which helped her plan.

    Few things that worked for us:

    1. They are going to a state school.  They are cheaper

    2. They looked into scholarships early, and then met the requirements.  It takes a bit of research, but sure beats having to come up with the cash.
    3. Both are planning on loans that amount to less than the price off a car (for all four years).  I encouraged them to get the loan in case of emergency. 
  9. Jojo

    Yes, easy loans and grants and also more affluent parents willing to pay whatever it took have inflated the cost of college insanely over the last few decades.  It has developed into a sliding scale in which at many schools only the less qualified kids with wealthy parents pay full freight in the end.  But to get your discount you have to tell the federal government everything about all your assets.  And then they use a formula to decide how much you can afford, a concept that fries my grits.  For instance a salaried guy with a huge 401(k) does not count that, but a small businessman whose retirement income is his working capital must declare that.  But anyway that is the deal.

    One of ours went to a private college with a good scholarship and- this is a big and fairly easy saver- finished in three years.  The other went to state school.

    It is hard to sell the idea of reining in federal loans and grants to keep down the cost of college.  There may finally be some market forces/ demand elasticity coming into play though. 

  10. Misthiocracy

    Ok, so according to the data from that link, and a few of my own calculations:

    • Total annual cost for an in-state student is about $21,045.

    • Approximately 62% of undergraduates receive financial aid.
    • The average amount of aid is $12,765, meaning 62% of undergraduates (5,680 students) pay an average of $8,404 per year, which is only about 14% more than the cost in 1985. (about 0.52% per year)
    • The school decided that the other 38% (3,468 students) were found to have “no financial need” for aid, and so they pay 186% more than the cost in 1985. (about 6.89% per year) 
    • According to inflationdata.com, $7,371 in 1985 is approximately equivalent to $15,846 today. (about 4% per year)

    So, there’s part of the answer. Over a third of the students are paying higher-than-inflation rates so that 62% of the students can pay much-lower-than-inflation rates.

    Note: The data doesn’t indicate what proportion of students live near enough the school that they do not have to pay for room & board.

  11. liberal jim

    Your case is illustrative of why the GOP’s 47% mantra is so wrong.   Are the people attending that college today better or worse off?  The people who benefit the most from government aid are not the people receiving it.  They are little more than ploys used as conduits through which tax payer dollars are given to  the well off and connected individuals.   Big government programs benefit the rich and well connected far more than the poor or average people.  This is what the conservative message needs to be.  The well connect populate powerful positions in both parties and that is why the message is never proclaimed.

  12. Pigboy

    Misthiocracy:

    Interesting. And yet the fees still make it back to the school somehow. And this is really my beef about the spike in college and healthcare rates: the government, rather than look at the actual causes of the dramatically  increased costs, counts it as a solution to (a) make it easier to borrow money or just give it away in the case of college, or (b) force everyone to buy insurance in the case of healthcare.

    (By the way, EWU is only about a 20-minute drive from Spokane and about half a million people, so the commuter students make up a disproportionately large percentage of the student body.)

  13. Roberto
    Pigboy: Maybe I’m not paying attention, but I have yet to hear a national politician linking the two and making the case.  · 1 hour ago

    I would be surprised if you did. Certainly at the state level voters seem to have a blind spot when it comes to education. Despite the exploding costs here in California we just passed a proposition increasing tax rates in some brackets and the sales tax as well, passed 54%-46%. No matter the problems the answer always appears to be the same, spend more money. 

    Ironically a significant chunk of these funds marked for higher education will simply be funneled to various financial concerns who have been additionally abetting the University of California’s out of control spending.

    The Occupy crowd must be ecstatic.

  14. HerrForce1
    Barkha Herman: @Pigboy:

    Here’s a book I bought for my daughter her senior year, which helped her plan.

    Few things that worked for us: 

    1. They are going to a state school.  They are cheaper

    2. They looked into scholarships early, and then met the requirements.  It takes a bit of research, but sure beats having to come up with the cash.
    3. Both are planning on loans that amount to less than the price off a car (for all four years).  I encouraged them to get the loan in case of emergency. 

    Thanks for the tips Barkha. I further suggest the book Debt Free U by Zac Bissonette. He mentions your tips and challenges conventional wisdom about college. Think of it as a cookbook, not as one formula.

    • Why can’t you work full time? 

    • Community college packs value and individualized instruction.
    • Large state schools better able to handle changing majors
    • Smart tips for FAFSA form
    • Know the motivations of everyone: HS counselor, admissions office, tour guide, loan officer (they’re not evil, just primarily pursuing their goals)

    As I prepare my high school junior, 8th grader, and 5th grader I wish I’d have had advice like this.

  15. Joseph Stanko
    Chris Campion

    There’s more to this, but colleges pick their matriculants, not the other way around. 

    True, but it runs both ways.  Students shop around before deciding which schools to apply to, then pick one from the ones that accept them.  I applied to 3 schools, and decided not to apply to one because the tuition was too steep.

  16. Lavaux

    I’d love to start a political party that employs brutal truths to shatter icons, one of which is The College Education. Simply put, getting a college degree does not guarantee one a lucrative career, particularly for degrees having anything to do with “deconstruction” or “perspectives”.

    For many, a college degree is an under-performing investment when opportunity cost is taken into account. If I were to say that to a low-information voter, it would sound something like… “A good plumber can clear 80 Grand a year without breaking a sweat, so why go 80 Grand in debt futzing around in college for four years? Save yourself the time and earn yourself some money instead.”

    I tried to convince my sister to consider not sending my nephew to college, and she looked at me as if I were blaspheming all that is good and holy. This taught me that to the extent that truth affirms fear, it’s unwelcome. I guess my new iconoclast party wouldn’t win many votes. Oh that’s right, there already is an iconoclast party – the Libertarians.

  17. Joseph Paquette

    We are missing the other scary thought, what if prices continue to rise  at the current rate.  Get your degree now!

  18. Southern Pessimist

    I don’t want to highjack the conversation but this is related. There was an article a few months ago at pjmedia, I think, that listed six college courses, of a semester’s length that every parent should require of their student, no matter what their major, to maximize their chance of getting a job. I could tell you what they were but you should probably think about it first.

  19. Lucy Pevensie
    liberal jim: Your case is illustrative of why the GOP’s 47% mantra is so wrong.   Are the people attending that college today better or worse off?  The people who benefit the most from government aid are not the people receiving it.  They are little more than ploys used as conduits through which tax payer dollars are given to  the well off and connected individuals.   Big government programs benefit the rich and well connected far more than the poor or average people.  This is what the conservative message needs to be.  The well connect populate powerful positions in both parties and that is why the message is never proclaimed.

    Amen.

    I have noticed that if I frame this discussion with my liberal friends in these terms–talk in particular about the benefit to university administrators–they get it and they get on board.  It’s still playing, in a sense, on the politics of envy, but in my opinion it’s a lot more legitimate envy than that directed at businesses.

  20. Edward Smith

    When I brought this up with a fellow conservative a while back, his only reply was that the cost of things like TVs, smart phones, and a whole host of technological marvels has dropped considerably over the same period of time — so I should just shut up and be happy. Not exactly what I’d want to communicate to potential voters.

    I hope you have not had cause to conclude that this “fellow conservative” is a true Conservative.

    You asked a perfectly good question and he dismissed you and your question summarily and without showing you proper respect.

    Conservatives respect other people even though they do not suffer fools to gladly or too long.

    It’s all the “Free Money” from Sallie Mae that did it.  And the utter lack of accountability on the part of the colleges and universities – the students too if they are allowed off the hook for their loans.

    IT IS GONNA SUCK to be the generation that has been given all this “Free Money”.  They will be like the immigrants of the 19th & Early 20th Century – having to endure cramped rooms & bedbugs – for their grandchildren’s better futures.

    IT SUCKS NOW!

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