The Great American University Crisis
Americans are asked to accept many strange things: that constant mass shootings are unavoidable; that basic healthcare cannot be provided to all as in Britain; that courts should be openly politicized; that extreme gerrymandering to distort election results is fine. But the strangest is that universities should bankrupt the average person.
In this important area, though, change may be coming. In recent days President Biden announced a new plan under which Americans can have up to $10,000 in federal student loan debt forgiven and the amount can double for those who in the past qualified for grants.
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Many Republicans are howling that this forces hardworking Americans to fund the partying of effete elites. That knee-jerk reaction stems from a dislike of the progressive overreach evident on many campuses, and sweeping opposition to “entitlements” (meaning state funding for anything). But viewed a different way, America’s insane college costs have fed a wider sense of dysfunction and decline that even contributed to the 2016 election of Donald Trump. People are angry, many are willing to burn down the house, and the university racket may be vulnerable at last.
Consider the facts: the average cost in tuition and fees for a four-year U.S. institution is now over $26,000 per year. That figure includes state schools partly subsidized by local governments, and is far lower than the cost of private universities which are generally considered superior and where costs can be double or much more.
At the same time, according to the U.S. Bureau for Labor Statistics, the median annual salary in the United States is around 54,000. In Pennyslvania, where I grew up, that would translate into maybe $40,000 in net pay. Over two-thirds of that would be needed to send a kid to the average college.
So Americans are forced to start planning for college from the day their children are born. Savings are drained to cover this stupendous expense, which contributes to the extraordinary fact that household net worth in the US is barely higher than in Israel ($62,000 per adult to $55,000), where wages are much lower. Graduates struggle for years with crushing “student debt,” a concept largely unknown anywhere else
Right now there is no real alternative; in much of the world, non-graduates are not nearly as employable in the modern knowledge economy. Yet the temptation of short-cuts is huge: webinars by the finest of teachers and Internet access to all the world’s knowledge have made autodidacticism far more plausible than in the past. The universities appear to have erected a rather wobbly house of cards.
Was university always such a financial drama? No.
I was an undergraduate at the University of Pennsylvania’s Class of 1985. This highfalutin Ivy League institution has always been among the most expensive and in my day the tuition (plus fees, whatever that means) was about $7,000/year. My middle-class immigrant parents struggled a little, came up with some assistance from my mother’s employer, and covered the bill. In today’s dollars, meaning after inflation, that tuition amounts to about $20,000. The cost of a year at Penn today is tenfold, and in real terms it is triple.
Meanwhile, salaries in real terms have most definitely not tripled; they were about $50,000 in today’s terms back then. According to Federal Reserve figures, the average annual growth in wages was only 0.3% between January 1989 and January 2016. Something similar is the case with household net worth.
College costs have shot through the roof for many reasons.
First, the number of elite institutions has not increased and their intake has not significantly grown, yet the general population has and globalization has dramatically raised the global interest. Supply has stagnated while demand has increased. This drives up unit costs and breeds arrogance and complacency on the part of the supplier.
Second, college in America has become a big business, and a successful one. The ShanghaiRanking of top global universities lists 8 of the top 10 as American (the other two being the UK’s Oxford and Cambridge); that’s typical. This success stems mainly from the graduate level. When it comes to research and publications, and Nobel prizes, there has been no equal to the U.S. university system.
The undergraduate zone (bachelor’s degrees) is basically a cash cow attached to and funding this (along with donations by the super-rich, of course). Students learn social skills, perfect the drinking of beer (in my view an important life skill), and in many places ally themselves emotionally with fanatical sports traditions that are the training grounds for the country’s world-class professional leagues. In some cases they complete their basic education; even mediocrity at the college level is useful to correct the results of an underfunded and often failing U.S. high school system.
As for the undergraduate pedagogy, at large universities often it is teaching assistants who carry the burden; professors are pushed to research and publish. The graduate level is where things flip (for me, professors began paying more attention to me in hopes of computer science research brilliance, where I regret to recall I failed them.)
Because it is such a big business, many of the school officials are largely fundraisers. The Harvard deans and provosts earn nearly a million dollars a year for this reason (and the schools “endowment” — or pool of assets — is close to $40 billion). Even the dean at the Irvine campus of the (public) University of California recently earned close to $400,000/year. Do these people’s skills merit 10 or 20 times the average US salary? Does the free market really demand this? One is reminded of the financial world’s “Masters of the Universe,” with their incomprehensible “instruments” and galactical bonuses — pre-2008.
US governments of both political parties until now have been loathe to truly finance this part of life, except in the form of student loans, which with all due respect to low interest rates are more of a banking scheme than a policy for the social good. These student loans are the second highest source of consumer debt in America, exceeded only by mortgages.
Does it have to be this way? Let’s look at the rest of the world:
- In Britain, the super-elite Oxford and Cambridge universities charge 9,250 pounds/year (under $11,000 at post-Brexit exchange rates) — and both are in every list of top world institutions;
- In France, the hyper-elite Sorbonne charges 10,000 euros per year — about the same;
- Many of Germany’s universities are basically free;
- In Israel, for local students the cost can be as low as $3,000/year.
Can America really not fix this? Does the gap have to be this preposterous?
Progressive US politicians who call for free college are ridiculed as radicals. We are told the money does not exist, but the country usually is increasing world’s largest military budget. Fully funding the 15 million students at a state school level would cost several hundred billion dollars a year at today’s inflated costs — but those costs can be reduced and it is anyway a blip on the $20 trillion GDP.
Of course, as with all things American this has become political.
US colleges have become hotbeds of leftist radicalism where students succeed in stifling voices of conservative opposition and agitating for “safe spaces” from intellectual challenge, while the right increasingly treats academia as an enemy (and who knows which came first). A Pew study recently found that 59% of right-leaning Americans consider colleges to have a “negative effect” on society. Among the left-leaning the figure was 18%. Polarization is growing; a few years ago views were not nearly so divergent.
Biden’s move is a step in the direction of sanity, but it doesn’t change the essence. When the scam of college costs comes a cropper the attack will probably be from the socialist left, and the right will not care (or even will look on with glee). Expect Americans to eventually rebel on this issue (as they will on the similarly ludicrous healthcare situation).
Colleges around the world might be part of the answer to this market failure. The idea of going abroad, gaining international experience that is valuable in a globalized world, not bankrupting your parents and not mortgaging your future will have appeal to deep-thinking young Americans with a taste for adventure. The demand will be there. What is needed is supply *and the resumption of travel, post-corona)
Yes, there is a quality issue. Academia is a delicate flower. American universities have benefited among other things from the influx of much of the world’s excellence (though this is now held at bay by xenophobic policies in part caused by post 9/11 trauma). Some places may struggle to compete with the networking value of U.S. schools. Success in partly supplanting them is not guaranteed; partnerships may be required, and indeed some already exist.
But quality institutions around the world certainly have an opening.
America, not so long ago, was a big part of the solution to the world’s ills. These days, unfortunately, it does not offer much of an example. But the world remains in dire need of fixing. Education is, basically, the only hope we have.