The Myth of College Costs Increasing Faster than Inflation

UPDATE Aug 30: Darin Toohey, a faculty colleague here at CU, just pointed me to a great letter of his to The Daily Camera from last January making similar points.

There is a common misunderstanding out there which makes it difficult for state universities to explain to the public the dramatic effect of state government budget cuts.

The public sees the price of an education reflected in the tuition, the amount that students or their families pay to attend the university. But the price of an education does not reflect the cost of an education. The reason for this is that state governments subsidize in-state students to attend their public universities. Thus, the total cost of an education is reflected in the tuition plus the state subsidy.

The state subsidy is typically hidden and out of sight, meaning that people assume that the tuition (and increases in it) are a reflection of the increasing costs of an education. In a situation where state support is diminishing, tuition must be increased to compensate or costs must be cut or both.

Let me illustrate these dynamics with the case of the University of Colorado, where I am a professor.

• In 2001-2002 in-state tuition was $2,614 and the state provided a $7,063 subsidy per student, for a total of $9,677, or after factoring in inflation, $12,289 in 2011 dollars.
• In 2011-2012 in-state tuition was $7,672 and the state provided a $2,839 subsidy per student, for a total of $10,511.

So over the 10 years the price of tuition went up by 293% -- inflation only increased 27%. This is a big increase, and certainly increases the burden on those who pay the tuition. However, over that same period the inflation-adjusted cost of delivering that education went down by 14%. How can this be? The simple answer is that the state has cut its subsidy per student by 60% (closer to 70% after inflation), transferring a large portion of the costs of an education from the state to the student. In Colorado at least, state university education is being privatized.

From this perspective, the University of Colorado should be applauded for its efforts to keep costs down over the past decade. This is a message that university administrators should advertise far more widely.