Inflation of College Tuition Costs

College tuition costs in the United States have gone up more than 500% since 1985. As can be seen in the chart, the inflation of college tuition has outpaced medical costs, housing, fossil fuels, and the consumer price index (CPI)—the general goods and services inflation index.

College education affordability encapsulates a multitude of complexities that needs to be understood before definitive reasons for tuition growth can be evaluated. However, with that being said, there is one main reason I’d like to highlight that is partially responsible for the recent raises in college tuition rates.

Decreased state and local funding for college education.

When the recession hit, state/local funding for universities was one of the first sectors of the budget that state legislatures cut. According to a Center on Budget and Policy Priorities report released last month, states are spending on average 23% less on every student compared to pre-recession funding levels (Adjusted for inflation).

Now as basic economics dictate, the costs in lost revenue (funding) are predictably passed on to the consumer, which of course is the student. Now if the university financing was in a pure economic system—which for the purposes of this explanation is a free market—the nearly 200% increase in tuition rates would cause less people to attend universities, which would in theory force universities to be more efficient so that they could lower tuition prices and attract more “customers” (students).

But, this pure economic system doesn’t exist—and if it were to, it would likely cause a class divide of prospective students, where the affluent could afford college and the poor could not, thus reenforcing present day economic inequality with even more educational inequality. As well, the market wouldn’t move at the speed needed and we would end up with fewer college students, which as a whole isn’t advantageous in a globalized and competitive economy.

Source: New York Fed

The question must then be asked, what stopped the inevitable decrease in overall college attendance? The federal government. The feds directly subsidize college tuition via grants, and student loans. In 2010, Obama signed a bill that expanded student access to federal pell grants. And since 2005 total student loan debt has more than doubled. Most would agree that pell grants are good policy, but when the government artificially props up university attendance through loans, the universities—and states—have no immediate reason to make college actually affordable, because they know that the federal government will pick up the tab, and the students will keep coming.

There is a specific hypocrisy that is present in the debate over both college tuition inflation, and CPI inflation. In 2011 Governor Scott Walker (R-WI) cut $250 million dollars from the University of Wisconsin education system. That comes out to a 21% cut in total UW funding, of which a lot of the increase cost ended up with students. Essentially what Governor Walker did is cause the inflation of tuition costs through the reduction of the subsidization of higher education.

The hypocrisy doesn’t lay directly with Scott Walker, but more with his big business supporters. The Koch brothers’ organizations have famously supported Governor Walker with endless campaign donations and are a campaign finance force inside the republican party. As has been so artfully demonstrated in Daniel Schulman’s book: Sons of Wichita: How the Koch Brothers Became America’s Most Powerful and Private Dynasty, the Koch brothers are resound proponents of practically completely free market enterprise. Which is an an economic wing that opposes loose money policies like the current quantitative easing being utilized by the federal reserve. The Koch brothers even wrote in an email to their employees warning about “runaway inflation”.

As can be seen in the first chart above, the only inflation that is “running away uncontrollably” is the inflation of tuition costs, partially due to cuts that they support and contributed to. Now, I’d like to present an alternative reason why they don’t care about tuition inflation, but do seem to care about CPI inflation. Tuition inflation affects the lesser priviledged among us more than it does the affluent. Even with tuition hikes, the upper class still won’t have a problem affording the best schools around. While, tuition hikes saddle more and more middle class students with student loan debt that can hinder their economic future.

You want to know what does affect the affluent? CPI inflation. If “runaway inflation” were to occur, the US economy would collapse as the Weimar Republic’s did. There’s no need to worry about that sort of inflation nowadays, but I think this insight can give a peak into the logic of people like the Koch brothers. The reason why they care about CPI inflation, and not tuition inflation is because they are looking out for their interests, and to hell with yours.