Why College Tuition Should Be Regulated

Forget about student loan repayment caps and tuition price calculators. It's time for the government to rein in the soaring costs of higher education

  • Share
  • Read Later
John Moore / Getty Images

President Obama speaks at the University of Colorado, Denver campus on Oct. 26.

Tuition at Stanford University in 1980-81 was $6,285. Thirty years later, Stanford’s tuition had risen to $38,700. Tuition in 2011-12 is $40,050. If the cost of milk had grown at the same rate, a gallon of milk would now cost approximately $15.

I haven’t yet purchased $15 gallons of milk, but as a college advisor I have counseled many students who are charged $50,000 per year for tuition, fees and campus housing. According to just released figures from the Commonfund Institute, the inflation rate for colleges and universities was 2.3% for fiscal year 2011, more than double the rate for 2010 and reversing a decelerating trend that began in 2008. Stanford, which estimates that 75% of its undergraduates receive financial aid, is not out of the norm. Drexel University, Carleton College and the Stevens Institute of Technology were among the 72 other schools that were more expensive than Stanford last year.

(MORE: The 24 Most and Least Affordable Colleges)

Since loans now comprise 70% of financial aid packages, the growing tuition burden falls squarely on student-borrowers who may have saved for college but who still can’t meet the high cost of attendance. Two-thirds of American undergraduates are in debt. This year, student loan debt will grow to more than a trillion dollars, outpacing credit card debt for the first time. As hundreds of thousands of high school seniors prepare their college applications, and their parents compile documents required for financial aid, Congress needs to seriously consider legislation that will rein in future tuition increases.

There are many reasons for the dramatic rise in tuition, including demand for better student residences, cutting-edge laboratories, IT improvements, cuts in state subsidies and administrative growth. Regardless of which factors are most significant, the fact remains that there has simply not been enough external pressure to force universities to contain costs. Ironically, the accessibility of student loans, while admirable at first glance, has contributed to tuition growth. And while President Obama’s recent proposal to cap student loan repayments depending on income is a step in the right direction, it doesn’t address the bigger problem of runaway tuition in the first place.

This is where government needs to firmly step in. The federal government contributes billions of dollars to research and development on campus and allows universities to function as tax-exempt institutions. Self-policing of college costs has not worked; government needs to tie its support of higher education to college costs.

(MORE: A New ‘Poor Students Need Not Apply’ Policy At College?)

If universities raise tuition more than the Consumer Price Index, they should be required by Congress to take money from their endowments to fully fund grants for the corresponding increase in need for students on financial aid. The 20 wealthiest universities alone are sitting on endowment funds worth $200 billion. Three-hundred and sixty-seven colleges and universities control tax-exempt endowments worth over $100 million.

To enforce the new guidelines, Congress and the Department of Education should create a commission that includes representatives of universities, Fortune 500 employers, consumer advocates and economists. Perhaps this could be a more expansive version of the 2005-06 Spellings Commission, which charted the future of higher education and suggested — but didn’t mandate — ways to better prepare students for the workplace. If universities don’t comply with the new guidelines, they will lose their 501(c)(3) status — a great incentive to control tuition costs rather than pay taxes on donations and endowment earnings and lose the ability to qualify for tax-exempt financing of infrastructure projects.

Admittedly, we need to strike a careful balance. We want to respect academic freedom and the ability of educational institutions to plan their own futures, but we can’t allow universities to continue offloading rising costs on to the backs of the vast majority of students and families. Congress urgently needs to pass legislation that will prevent university costs from bankrupting the next generation of today’s youth.