Vance Ginn, Ph.D., is an accomplished economist finding free-market solutions that let people prosper. He is founder and president of Ginn Economic Consulting where he provides high-quality research and trusted insights on how to affect change at the federal, state, and local levels. Ginn’s experience includes time in public policy, government, and academia. He is chief economist at Pelican Institute for Public Policy and a senior fellow at several think tanks, including at Americans for Tax Reform, Texas Public Policy Foundation (TPPF), and Young Americans for Liberty.
Tom K. Lindsay, Ph.D., is a distinguished senior fellow for Next Generation Texas at the Texas Public Policy Foundation. He has more than two decades’ experience in education management and instruction, including service as a dean, provost, and college president.
The extortionate cost of higher education continues to rise and is unlikely to moderate soon. From 2000 to 2020, college tuition and fees nationwide rose more than three times faster than general price inflation and more than twice as fast as average hourly wages.
Put simply, college is unaffordable to many and becoming more out of reach for many more.
Making matters worse, the Biden administration has proposed to attempt to solve this problem with record levels of new government spending. This is on top of the billions of dollars Congress has already allocated to more than double the Department of Education’s most recent annual budget. Biden wants a 41% increase in the department’s pre-pandemic budget along with “free” college for families earning less than $125,000 annually and “free” community college for all, together with a long list of other costly, socialist-style programs.
Of course, nothing is free, as the cost to taxpayers and students will be much higher in terms of taxes, lower quality education, and waiting lists.
This proposal is another D.C. idea of throwing more money at problems, even though that fails every time. The U.S. spends roughly twice the amount on higher education per student as the average spent by OECD countries. Our problem is not lack of resources, but lack of vision.
Driving higher tuition is excessive government intervention with increases on the demand side from subsidized student loans, Pell grants, and other factors, and suppression on the supply side through restrictions and accreditation limitations on new institutions and opportunities for competition.
So, what justifies more than doubling of the price of higher education?
The quality of instruction has not doubled. Neither has the student-to-teacher ratio. Students are not earning substantially more post-graduation, and in fact are graduating with more debt than ever as the total student loan debt now exceeds $1.7 trillion.
If student outcomes are not improving, then where is the money going? In a word: administrators.
Administrative staff has grown substantially faster than faculty, to the point where there are now more administrators than faculty at a typical university. From 1987 to 2012, colleges and universities nationwide more than doubled their administrative staffs. The portion of college budgets devoted to teaching—which is the actual mission of education—has fallen substantially. The source of this spendthrift administrative growth is government subsidies for higher education.
As grants, student loans, and other state and federal funding have increased, institutions of higher education have lost the need to spend efficiently. They waste these taxpayer dollars on profligate administrative expenditures, knowing full well that Uncle Sam (read: You!) will keep the assistance coming.
The normal free-market mechanism of competition which keeps prices down has been abrogated by this heavy-handed government intervention. The “profits” gained by these public institutions would bring about competitors in the private market, but that’s not possible given the restricted supply and limited accreditations, which is why the inflated demand simply pushes up tuition at rapid rates.
Instead of doubling down on government failures like these, it’s time to do something different. In Texas, we can temporarily limit tuition growth via Senate Bill 167 in the Texas Legislature.
This bill would provide a viable alternative to more spending proposed by the Biden administration.
It temporarily limits tuition at public colleges and universities to price inflation for the next five years. This would better match the cost-of-living adjustment received in wage growth by many families and taxpayers. While the limitation does not include fees, tuition is a much larger portion of the total cost of attending these public schools.
The effect will be to force these public institutions to rein in the number of administrators (and associated costs), along with other inefficiencies. If these institutions foolishly cut spending on instruction, then students and faculty can simply leave and go to another school.
A perfect example of this policy, voluntarily prescribed, is Purdue University—a public institution of higher education in Indiana that is comparable in size to the University of Texas and Texas A&M University. Purdue has kept tuition frozen for the last decade, during which its inflation-adjusted funding from the state legislature has actually decreased.
Clearly, restraining the cost of tuition can be done—not by expanding government intervention, but rather by better managing the resources provided to these institutions, and ultimately through competition. If we want things in higher education to change, then we must change them. Otherwise, they will continue as they are, unaffordable as that may be.