换妻社区

Can supply-and-demand theory also explain the rising cost of attending college? 

The National Center for Education Statistics notes that the cost of a single year of college (at a four-year private institution) is 24 times higher today ($35,830) than it was when early baby boomers graduated in 1969 ($1,487). 

Let鈥檚 consider whether this was caused by simple supply and demand challenges: 

• Are there too few professors?
• Are universities producing fewer PhD graduates?
• Are too many students trying to squeeze into small-sized classrooms, with no alternative such as distance education? 

The answer to each of the questions, of course, is no. 

Neither cost-push inflation, nor demand-pull inflation, explains a 24-fold increase in the price of higher education over just two generations. 

Neither cost-push inflation, nor demand-pull inflation, explains a 24-fold increase in the price of higher education over just two generations. 

What paid for a year of college in 1969 now just buys books 

The College Board that the annual cost of college textbooks averages $1,240/year. That amount would have paid for an entire year of tuition in 1969.

If supply-and-demand fails to explain the price increase of higher education, can quality explain it? In other words, if the price of education is 24 times higher, did it get 24 times better?

If we follow the money, we find the answer. 

鈥淔ollow the money,鈥� is the most well-known line in 1976鈥檚 All the President鈥檚 Men, which put the Watergate scandal on the silver screen. 

鈥淔ollow the money鈥� is an exercise worth doing when it comes to pricing higher education. Nationally, only about 30 cents of every dollar of tuition is tied to academic instruction (i.e., faculty compensation, classroom expenses, etc.). If that seems low, it鈥檚 because it is low. Most of the tuition dollars don鈥檛 actually support classroom instruction.

Keep following the money

Lenders are in the business of making money, and it鈥檚 important to remember that the U.S. federal government through its Plus student-loan programs. In a country where change is always difficult to effect, reforming government programs that actually produce positive returns remains鈥攗nfortunately鈥攗nlikely. 

The federal government isn鈥檛 the only beneficiary, however. 

The widespread availability of student loans is what has enabled universities to increase the sticker price of tuition year after year (after year). Essentially, universities exercised free rein to charge whatever they could and, after distributing merit- and need-based aid, simply to cover the difference.  

The price of tuition, along with the process of paying for it, are fundamentally broken

The writing is on the wall for higher education: colleges and universities are on the path to losing a generation (or more) of future students due to decades of tuition increases that failed to produce better outcomes.

In a previous piece, I wrote that 鈥渨hat鈥檚 at stake is nothing less than the competitiveness of the American economy and the broader American Dream.鈥� What鈥檚 also on the line, however, is the continued relevance of a college education. 

One spin on a common saying is that 鈥淚f there鈥檚 no solution, there鈥檚 no problem.鈥� A real problem exists in the affordability of American colleges, and there ought to be no neutrality in the matter. At 换妻社区, we started Hope Forward with the goal of changing how students pay for a Hope education. Neither pay-as-you-go nor pay-it-back, Hope Forward aims to fund 100% of a student鈥檚 education at 换妻社区 in exchange for giving back to the college after graduation鈥攅ssentially paying it forward to future students. 

With 22 students in our inaugural cohort, Hope Forward aims to eliminate the financial barriers to attending our college, and enable students to choose the major that interests them most rather than the one they expect to deliver the highest returns relative to their investment. Our primary criterion for selection into the program was neither need nor merit, but rather a desire鈥攕tated and specific鈥攖o make a positive impact. In turn, we believe this desire for transformative impact creates a higher quality learning environment.

However, the opportunity for transformation change is much bigger than Hope Forward or even 换妻社区 itself. My deeply-held view is that Hope Forward ought not to be 鈥渃ompetitive鈥� from the standpoint of winning student enrollments from other institutions. Rather, my hope is that other colleges and universities will follow our model. 

Learn more about Hope Forward, an entirely new funding model for tuition at 换妻社区