It Is Time to Bring College Education into the Modern World

(777 words, three-minute read)

Student debt and the cost of college will be topics in the general election as they were during the Democratic primaries. College education in America has become unaffordable for too many and a poor investment for many more. Candidate Biden is proposing to expand tuition subsidies and forgive some student debt. Is there a way to address the problem without more spending? 

First, is there really a problem to solve? 

The answer appears to be yes. Since the 1980s, the real cost of four-year college has more than doubled, thereby rising as fast or faster, depending on the source, than the cost of healthcare. At the same time, states have steadily reduced their support, shifting more of the cost directly to students. 

Secondly, 20% of student borrowers are behind on their loans. This supports other data suggesting that for many, a four-year degree does not result in a job that pays enough to warrant the investment. 

So why does college cost so much?

In their book Why Does College Cost So Much? Robert B. Archibald and David H. Feldman provide an exhaustive study of this question. They conclude that the largest driver of college costs over the past 35 years has been the cost of skilled labor. As we have discussed elsewhere, the compensation of highly skilled professions such as doctors, lawyers, and accountants has increased significantly over the past two decades on a real basis, meaning after adjusting for inflation, while lower-skilled compensation over the same period has not. Skilled labor in colleges accounts for approximately 68% of all employees and 81.18% of college labor costs. These are higher percentages than other highly educated professions such as legal services, or offices of physicians and dentists. 

A second driver is the cost of technology. Modern colleges have large and complex information technology departments and employ increasingly expensive technology in research and teaching. 

A third contributor is the growth of student services and amenities such as student healthcare, counseling and career services, accommodations for students with disabilities, and athletic and fitness facilities. 

But the problem isn’t cost, it’s productivity

The increase in college costs is only a problem because it has not been matched by an increase in productivity. By limiting their sales of education to the small number of students that can fit into their on-campus classrooms, colleges have no choice but to distribute their increasing fixed expenses over a static number of students. It is an antiquated model, one that is mired in the past while the world has changed around it.

Few aspects of our lives have been untouched by the digital revolution. Most things that once required synchronized time and mobility can now be done without either of these restraints. We shop for custom clothes, buy groceries and cars, stream new movie releases, work, socialize, and practice telehealth, all from our mobile devices, when and where we want. Throughout all this change, the tradition of assembling a cohort of students on a campus for nine months out of the year has remained stubbornly the same.

Another reality of digitization is that the marginal price of most things that can be digitized goes to zero. It costs Google nothing to perform another search, it costs Facebook nothing to add another account, and it costs your brokerage firm nothing to process your last trade. 

All solutions don’t require more spending

By making education broadly available online, colleges can reach more students and drive the marginal price of education down to a level more easily affordable. The reputation of an elite institution can be maintained by its graduation standards, not by the artificial limitation of access to the privileged few. Why shouldn’t everyone have a chance to compete?

But what about the campus experience? 

This objection is one we commonly hear during this time of COVID: “Online does not replace the campus experience.” No doubt that is true. But tell that to the talented child living in poverty for whom the cost of campus life is prohibitive. For him or her, the online version is better than none at all.

We have pop-up stores, why not pop-up campuses?

Even this problem can be addressed. Those that choose to have a campus experience can always pay for it. But for those who can’t afford it, schools could collaborate to bring virtual students in similar neighborhoods together from time to time in order to have an “on-campus” experience. This would allow students to exchange and debate ideas in person with each other and with representative professors. This is admittedly not the equivalent of nine months of dorm life, but it might be the next best thing. And if it is all you can afford, isn’t it better than nothing?

Colleges are monopolies. Why would they change?

Despite having declined, state and federal subsidies still account for a significant portion of college and university revenue, as high as 65% in some research universities. It would be fairly simple to use this influence to impel expanded online access.