Some Surprising Factors Contributing to American Loss of Interest in College

In Part 1 of this series, I reviewed rather alarming data about Americans’ loss of faith in the value of higher education. That, correspondingly, seems to be causing the United States to lose ground in educational attainment compared to other developed countries. Our next question then is, “Why are fewer Americans interested in higher education?”

In this next part of the series, I’ll describe some rather surprising aspects and their components.

Snowballing Prices

It’s probably not surprising that the rapidly rising cost of a college education is a big factor. As the University of Pennsylvania’s Pell Institute’s October 2022 report found, the cost of a college education has soared since 1974, even in inflation-adjusted terms.

Average college costs for all institutions, weighted by full-time undergraduate enrollment, were 2.6 times higher (in constant 2020 dollars) in 2019-20 than in 1974-75…the cost increases have largely occurred since 1980. In 1980, average costs were lower in constant dollars ($9,307) than in 1974-75 ($9,849). After 1980, average costs rose steadily to $25,281 in 2019-20.

Fox Business produced the chart below from research by My eLearning World. This chart shows the actual rise in the cost of college versus what it would have been if it only rose due to inflation. Thus, the difference between the actual and “steady w/inflation” numbers shows the increase in tuition above inflation.

Of course, the next natural question would be “Have their costs gone up and now they are passing the increase on to the students?” And you would be correct as costs have risen. So we’ll look at those first. But rising costs do not tell the whole story!

Loss of Government Funding

One of the biggest cost increases for public colleges has resulted from a decline in government funding for public institutions, according to a FiveThirtyEight analysis by Professor Doug Webber of Temple University. He claims that after the Great Recession of 2008, governments scrounged to cut costs. Thus, between 2008 and 2018, public funding for higher education was reduced by a hefty $6.6 billion, according to the Center on Budget and Policy Priorities, a Washington DC-based research institute.

Marketing Costs

Another cost increase has been marketing. With the proliferation of for-profit schools in the higher education market over the last couple of decades, the competition for students has gotten tougher, forcing all schools to spend more on marketing. John Katzman of Inside Higher Ed explains:

There’s been a great deal of recent press and politics around the climbing walls, lazy rivers and other seemingly lavish campus amenities that have become commonplace at colleges and universities. But critics are missing the real arms race in higher education: a new student-recruitment spending war that is orders of magnitude more expensive and ends in only higher tuition rates for students -- with none of the fun and relaxation.

Executive Salaries

Additionally, there is some evidence that, like other industries, the pay of senior executives is going up rapidly. According to an analysis by The Chronicle of Higher Education, many university presidents make millions of dollars a year. The current top public earner is W. Randolph Woodson of North Carolina State University, whose annual salary is well over $2 million. Private university presidents can make up to twice that. However, it is unclear how big or widespread this factor really is as there are many different types and sizes of educational institutions.

Administrative Costs

Administrative costs have also been rising significantly. According to an investigation in The Atlantic, American colleges spend more on their non-teaching staff — which includes everything from alumni-network fundraisers to dining hall employees — than nearly any other higher education system in the world.

The Baumol Effect

You might wonder: “How can professors be making so much more if their productivity has not really increased that much?” Some economists argue that the surge in staffing costs might be due to the Baumol effect, which addresses how wages rise in jobs with low productivity growth simply because wages are rising in other jobs that have high productivity growth. This occurs because other higher-paying jobs create competition. For example, if salaries in academia don’t remain competitive, a university professor might instead find a better salary by going into business.

The graph below shows some confirmation of the Baumol effect, by depicting the steep rises in services like college tuition and medical care against price rises in new vehicles and apparel. Although the chart only goes to 2012, it illustrates the point.

When looking at a graph containing a phenomenon like college tuition that is rapidly accelerating, a systems thinker would start wondering if there is some kind of reinforcing loop underlying it—or what is commonly called a snowball effect—where a phenomenon is feeding back into itself to create a compounding result. And there is.

Maintaining a High-Quality Perception

A surprising factor that may separate the rise in tuition from rises in most other areas of the economy is an alleged reinforcing loop in institutions chasing the appearance of eliteness. A recent CNN report described how as the wealth divide gets greater, elite schools like Yale and Stanford raise their prices, knowing they are the most desirable schools and the wealthy can pay pretty much whatever is asked. Then, comes the shocker: To also appear elite, other schools raise their prices in kind, compounding the problem.

These schools can’t really draw students from Stanford at the same price, so they then create schemes to offset the “sticker” price so that the school is not really as expensive as it appears. As Carolyn Morris describes:

According to a recent interview with New York Times finance columnist Ron Leiber, other colleges have artificially raised their listed prices to appear more elite, while simultaneously increasing their endowment and merit-based aid to bring the price down to a more affordable level. This creates the illusion of steep discounts. Both tactics attract students — and often cost them more in the long run. However, according to a 2021 report by the American Council of Trustees and Alumni, colleges’ discounting programs aren’t keeping pace with tuition increases.

The government has stepped in to help by making loans and other sources of funding more available. But this might be backfiring because it also enables students to pay higher prices by taking on more debt, thus discouraging the schools to reduce tuitions. As Morris describes:

In contrast to today, very few college students took out loans from the federal government in the 1970s. Then the Department of Education expanded eligibility requirements for Pell Grants and other sources of funding. As a result, federal student aid has become ubiquitous. State student aid is also reaching record highs. Today, colleges know that many students can get some or all of their tuition paid for via loans. The Bennett Hypothesis posits that these schools are less likely to lower their costs when they know Uncle Sam is going to foot the bill.

Subsequently, loans have spiraled out of control to the point where the average student loan debt is reportedly just over $37,000. The high number of students graduating with high student loans has then further tarnished the value of higher education to many potential applicants.

All of this was probably enabled by a certain consumer price insensitivity because college was just assumed to be worth it. It is not traditionally the kind of investment you do a lot of calculations to determine the return on. Rather, traditionally students simply aspired to get into the best college they could. But there is a point where people begin to question the price tag.

Misperceptions and Attitudes

There is more to the issue than price dynamics though. The chart below from Pew Research shows that while affordability is one big reason for not completing a degree, there are several others.

The nature of that survey doesn’t allow us to dig down specifically into what the responses mean, but additional research exists that can give us some insight into other reasons people have for not wanting to go to college.

Just Not Wanting to Do the Work

Among the research about why college enrollment is less appealing, some researchers point out students who just don’t want to do the work. For example, Jon Marcus of The Hechinger Report interviewed parents and kids in Tennessee and found high school graduates who

• Just balked at writing essays or filling out the forms needed.
• Were convinced that there was easy money to be made on TikTok or YouTube
• Wanted to make money right away, such as at the Volkswagen plant in Chattanooga.

The Wall Street Journal, exploring specifically why men in recent years were enrolling at lower numbers than women, found that “Men in interviews around the U.S. said they quit school or didn’t enroll because they didn’t see enough value in a college degree for all the effort and expense required to earn one. Many said they wanted to make money after high school.”

Further, The Wall Street Journal suggested other cultural stressors that might be contributing to the sense of “not wanting to go,” such as video games, pornography, increased fatherlessness, and cases of overdiagnosis of boyhood restlessness and related medications. There was also a sense among some interviewees of a general lack of direction in life, as illustrated by the following stories from the article.

Many young men who dropped out of college said they worried about their future but nonetheless quit school with no plan in mind. “I would say I feel hazy,” said 23-year-old Jay Wells, who quit Defiance College in Ohio after a semester. He lives with his mother and delivers pallets of soda for Coca-Cola Co. in Toledo for $20 an hour.

“I’m sort of waiting for a light to come on so I figure out what to do next,” he said.

Jack Bartholomew, 19, started his freshman year at Bowling Green State University during the pandemic, taking his classes online. During the first weeks, he said, he was confused by the course material and grew frustrated. Finally, he quit. “I don’t know what I’m going to do,” he said. “I just feel lost.”

These hint at other underlying problems, perhaps caused by the fast pace of change in the world or other breakdowns in social or family structure. But understanding them more would require further research.

Distrust of “Liberal” Education and Elitism

Another big area of decline is the large amount of Republicans who believe colleges are too liberal and they don’t want to be told what to do. A 2017 Gallup study conducted amid growing debate about free speech on college campuses found many Republicans critical of higher education for what they see as pushing a liberal agenda.

Those concerns are evident in the partisan gap in ratings of higher education by both Gallup and Pew Research Center. Pew documented a substantial drop in Republicans' positive ratings of higher education between 2015 and 2017, and those lower ratings persist in 2019.

Not Understanding the True Cost is Lower

Another surprise is that the high sticker price is a little bit of a perception issue. The Hechinger Report explains that people often don’t understand that the sticker price of a college is not necessarily the real price. Potential students also often find the opportunities for financial aid are too confusing to figure out. Also, parents are suspicious about divulging what they earn so that their kids can get financial aid.

CNN Business recently reported the net cost after financial aid has actually gone down over the last five years. Writer Nicole Goodkind explains,

Yes, sticker prices are increasing. But the net price of college — that’s the amount that students and their families are actually shelling out — has been decreasing.

The average student at a private four-year college paid $32,800 for tuition and room and board last year. When adjusted for inflation, the actual price paid for private college has dropped by 11% over the past five years, according to College Board data.

For public colleges, the net price averages out at just over $19,000 and has dropped 13% over the past five years.

Possibly this means prices are beginning to respond to reduced demand, so I’ll also bookmark that for later. For those who want to understand it better now, a fully detailed report of how tuition prices and financial aid interact can be found in The College Board’s Trends in Trends in College Pricing and Student Aid 2022.

Sour Grapes

Finally, one of the most surprising reasons for the decline seems to be from a source that used to be one of higher education’s biggest proponents—parents! I always used to say “You never regret finishing the degree, only not doing it,” but apparently, that is not always true.

From Jon Marcus's interviews of kids in Tennessee:

“The expectations of going to college from their parents, it died down — that if you don’t go to college, you’re a bum,” Ever Balladares said about why many of his fellow graduates of LaVergne High, southeast of Nashville, don’t plan to continue their educations, as he does. “They don’t think that anymore.”

The reason for this seems to be that many college graduates themselves are not sure their education was worth it. As Mr. Marcus states,

More than four in 10 bachelor’s degree holders under 45 did not agree that the benefits of their educations exceeded the costs, according to a survey by the Federal Reserve. Only a quarter of recent grads in another survey, by the educational publishing and technology company Cengage, said that, if they could do it again, they’d take the same educational path.

That adds up to a lot of bad reviews passed down to younger siblings and classmates, who consider family and friends the most trustworthy sources about whether and where to go to college.

I believe this turn of events is likely related to findings that I mentioned in Part 1 of this series, which are that only certain degrees have positive ROI, not all degrees. We don’t know which degrees the people in the studies had, but one issue is that a lot of people who get degrees later think they made the wrong choice.

For example, The Wall Street Journal shares one woman's perspective that is probably typical:

Ms. Tobias … graduated in 2003 from Lake Erie College, a private liberal arts school, with a degree in equine studies and $85,000 in student loan debt.

She worked at a horse stable giving riding lessons for several years before realizing she wasn’t earning enough money to live on or make her student debt payments. She now works as a dialysis technician and earns $36,000 a year at a medical facility, which provided training at no cost to her.?

Ms. Tobias pays $125 a month on her student loans—the minimum due. Her balance has ballooned to $145,000. She has made peace with the reality that she will likely die without having paid off her debt, she said.

The Net Result

This article has reviewed some major elements of a complex topic. Along the way, we have seen results that at least I found very surprising, including the following:

• There is a rising price loop in tuition that is driven by institutions raising their prices to appear more elite, while options for reducing the cost are often hidden and difficult to understand. Higher prices are also being driven by higher labor costs and greater administrative and marketing needs.
• Although historically, people just assumed college was worth it, the high prices are now causing them to question the value of college.
• Some of the decline in interest is due to dubious perceptions about the viability of other money-making opportunities (e.g., TikTok), and other parts are the unwillingness to invest years in education and the fear of a liberal orientation in colleges.
• Many traditional degrees offered by colleges do not lead seamlessly to prosperous careers. Consequently, many college graduates are questioning the value and discouraging their children from attending college.

Certainly, we could delve into many of the areas in this article further to see what they mean. For example, we have not yet looked at how disparities in income levels and racial equity are reflected in the numbers. But the factors listed already give us a clearer structure for further inquiry in part 3, where we’ll take a look at possible solutions and actions citizens can take.