The Cost of Higher Education rose Twice as Much as Health Care Costs

Posted by PITHOCRATES - August 31st, 2013

Week in Review

It’s bad enough that higher education is programming our kids to become good liberals.  But their getting rich in the process is just rubbing salt into the wound (see College Costs Surge 500% in U.S. Since 1985: Chart of the Day by Michelle Jamrisko & Ilan Kolet posted 8/26/2013 on Bloomberg).

The cost of higher education has surged more than 500 percent since 1985, illustrating why there have been renewed calls for change from both political parties.

The CHART OF THE DAY shows that tuition expenses have increased 538 percent in the 28-year period, compared with a 286 percent jump in medical costs and a 121 percent gain in the consumer price index. The ballooning charges have generated swelling demand for educational loans while threatening to make college unaffordable for domestic and international students.

What expenses does a college have?  There are shelters (i.e., buildings) where students sit and learn.  But shelter costs rose nowhere near the amount going to college did.  So it’s not the buildings.  So what else do colleges have?  That tuition pays for?  Excluding books and living expenses that are above and beyond tuition expenses?  Well, the only other thing they really have are people.

College administrators and college professors.  If the high tuition costs are not due the costs of the buildings on the college campus then we must be paying the people too much.  In pay and benefits.  So let’s crunch some numbers.

The average annual cost for a 4-year public college is about $18,000 (see The Average Cost of a U.S. College Education posted 8/24/2010 in US News and World Repot).  Based on a typical enrollment of 40,000 students that comes to an annual college revenue of $720,000,000.  If the college has $1.5 billion in debt on its books for capital improvements on average at 6% that comes to an annual interest expense of $90 million.  Let’s assume they retire $50 million in debt every year.  And their operating costs (everything else but pay and benefits for administrators and professors) are, say, $25 million.  Subtracting all this from the annual tuition revenue leaves $555 million for pay and benefits each year.  Assuming a professor/administrator for each 20 students that gives us 900 professors/administrators.  Dividing this into that $555 million gives us about $617,000 per professor/administrator annually.

This is just a rough estimate but it does give you an idea about the amount of money we’re talking about here.  Not all professors are making $617,000 but if you’re tenured you’re living well.  Very well.  And administrators typically live far better than tenured professors.  This is what students are going in debt for.  To give a privileged few a life others can only dream about.  Worse, a lot of these students who graduate have an unmarketable degree.  In an economy where employers are looking for people with math and science skills people with degrees in romantic languages or gender studies will not fare well.  But the people who sold them those degrees will be doing very well.  This is why we have a student loan debt problem.  Students took on enormous debt for a degree they can’t use.

Everyone loves to complain about the high cost of health care.  And demand that government do something about it.  Well, they did.  They gave us Obamacare.  Which promises to squeeze hospitals and doctors.  To make them do more for less.  Obamacare is so bad that it is causing some doctors to retire early.  Just so they don’t have to deal with it.  Yet the cost of college has gone up at twice the rate of health care costs.  But where is the outcry over that?  Where are the people demanding that government do something?   To squeeze those universities, professors and administrators?  Why should they get rich at providing education.  If doctors shouldn’t get rich saving lives why should educators be allowed to get rich selling unmarketable degrees?  Just why is it educators can get away with being the greediest of the greedy and escape government scrutiny?

Because they teach their students to be good liberals, that’s why.  And this is so valuable to Democrats that they are willing to raise the taxes on their constituents as much as it takes.  Because without the programming higher education provides few would vote Democrat.

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FT169: “College is more about making Democrat voters than giving students marketable skills.” —Old Pithy

Posted by PITHOCRATES - May 10th, 2013

Fundamental Truth

Another Big Reason why College Tuition has been Soaring is because of Public Sector Unions

College tuition is rising.  With increases greater than the rate of inflation.  With some tuition costs growing greater than costs in health care.  There are many reasons for this.  Unlike private sector business colleges cannot produce more with less.  That is, they cannot use productivity gains to educate more students with fewer professors.  Auto manufacturers can use robots to replace people on the assembly line.  Reducing wage, pension and health care costs.  The biggest costs that go into a car.

Universities are big campuses with lots of buildings that basically do one thing.  Sit students down in front of a professor.  This hasn’t change since the first days of higher education.  The only things that have changed are the buildings are a lot nicer.  And university employees all have better pay, pensions and health care than they used to have.  Which is why tuition costs keep rising.  For universities, unlike auto manufacturers, can’t speed up their assembly lines by using robots instead of people.  But it’s not only the auto manufacturers and the universities that have high labor, pension and health care costs.

Another big reason why university tuition has been soaring is because of public sector unions.  Who have negotiated some extremely generous union contracts.  Cities and states everywhere are drowning under the costs of their labor, pension and health care costs.  Forcing them to cut back spending elsewhere to pay for those generous public sector union contracts.  So they’re cutting back on their subsidies for higher education.  And what the state cuts the universities just tack on to the student’s tuition bill.

Universities lure High School Kids into College with Promises of a Big Paycheck for an Easy Degree

Today’s tuition costs will saddle a student with the kind of debt that can pay for a house.  A very big house.  One of those McMansions.  Depending on where you go to college.  Which is all well and fine if a student gets a high-paying job after graduating.  Sadly, though, a lot aren’t.  A lot are taking jobs that they could have gotten out of high school.  Without that massive student loan debt.  Debt they will be paying for a long, long time.  Making it very difficult for them to buy a house and start a family.  And the reason for this is too many students are taking degrees with no market value in a high-tech economy.

Today’s businesses are looking for people with a strong science and math background.  For this is what businesses in a high-tech economy need.  Not people with degrees in anthropology.  Philosophy.  Women’s studies.  Art history.  Comparative literature.  Communication.  Or a myriad of other degrees that a business just can’t use.  Yet our universities are selling these degrees.  Telling their prospective students who don’t want the heavy math load a science and engineering degree requires that these other degrees are just as good.  And that they, too, can have that big paycheck.  Just like engineers and chemists and doctors and physicists.  All they need is a student loan.  And the world can be their oyster.

So these kids starting their adult lives start that life by making one of the worst decisions of their lives.  Because they really want to go to college.  For the fun.  Universities lure these high school kids into higher education.  Appealing to them as adults.  Who can live away from home out from under the judgmental eyes of their parents.  For on a college campus there is a lot of fun to be had.  Sex.  Drugs.  Alcohol.  And health services.  Such as birth control and access to abortion services.  For all the consequence-free fun a high school graduate could ever ask for.  This is the bait.  And all they have to do to have all of that grownup fun is to borrow enormous sums of money that they will probably never be able to pay back.

Liberals say You should Never Rush to Judgment, Especially if we can’t Blame Conservatives

For the universities, though, it’s not just the money.  For their curriculum is the product of those Sixties’ radicals.  Who tried to overthrow capitalism.  And replace it with communism.  As they were never able to incite the workers’ revolt in the United States they changed tack.  And continued their revolution from the inside.  By becoming college professors.  Who eventually got tenure.  And went on to write the curriculum.  Basically an anti-capitalist, America is responsible for all the world’s problems and an anti-religious/anti-tradition curriculum.  Hence the socially liberal campus where anything goes.  And those college degrees that have no market value.  That advanced a relentless attack on capitalism and business.  And made their students eschew American greatness.

This curriculum has helped President Obama win reelection despite a horrific economic record.  And a brutal attack on the American mission in Benghazi.  The result of a failed foreign policy that tried to make nice with America’s enemies.  Who have been trying—and at times succeeding—to kill Americans.  The Fort Hood shooting by a radical Islamist.  The underwear bomber (failed Islamist plot).  The Times Square bomber (failed Islamist plot).  As well as other smaller and lesser known incidents.  Both successful and failed Islamist plots.  Then Benghazi.  And the death of 4 Americans.  Despite earlier witnessing an increase of anti-Western violence in the city.  A resurgent al Qaeda.  And an anniversary date holy to radical Islam.  9/11.  The U.S. mission in Benghazi requested additional security.  The Obama administration denied it as it would not fit the 2012 campaign meme.  ‘Osama bin Laden is dead.  And General Motors is alive.’  President Obama had won the War on Terror with the killing of bin Laden.  Therefore, they couldn’t have a terrorist attack in Benghazi before the 2012 election.  So the Obama administration made up the story about an anti-Islamic YouTube video that led to a spontaneous protest in front of the U.S. mission.  A protest that naturally got out of hand when the people pulled RPGs and mortars out of their pockets and started a military assault on the American compound.

The Obama administration then started to disseminate the lie.  They sent Secretary Rice to the Sunday morning television shows with severely edited talking points to downplay any role of radical Islam.  Then President Obama and Secretary Clinton made numerous public statements denouncing that YouTube video.  Even made a video to air in Pakistan.  And the mainstream media, the product of that anti-capitalist, America is responsible for all the world’s problems and anti-religious/anti-tradition curriculum never questioned anything.  They just dutifully carried the administration’s water.  And now that signs of a cover-up are coming out the administration is saying the only reason why they made any edits to those talking points was to prevent anyone from rushing to judgment.  Something they say we should never do.  Especially if we can’t blame conservatives.  Or Christians.  Like they did with the YouTube video that proved to be a red herring.  And as they—and their friends in the mainstream media—have rushed to judgment in the past.  By quickly blaming radical conservatives for every other massacre.  Only to see it turn out to be someone who wasn’t a conservative.  But a radical Islamist(s) instead.  Or someone suffering from mental illness.

Of course this wouldn’t be possible without higher education.  Where college is more about making Democrat voters than giving students marketable skills.  One could even blame those deaths in Benghazi on that anti-capitalist, America is responsible for all the world’s problems and anti-religious/anti-tradition curriculum.  (As well as being the reason why these kids can’t find any high-paying jobs; the vote for anti-business Democrat candidates whose policies discourage economic growth.)  Because protecting Americans in Benghazi would have been bad for the Democrats in 2012.  So perhaps we should be addressing the high cost of higher education.  And follow the example of the automotive industry.  By producing more graduates with fewer professors.  And put an end to the liberal Shangri la of the college campus.  By replacing the bulk of higher education with online studies.  For if a 15-year old girl can make medical decisions about the morning after pill by reading the contents of the packaging without consulting a doctor or parent then she can get her higher education online.  Without all the fun.  Or student loan debt.

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Foolish Majors and Bad Economic Policies lead to High Unemployment among Recent College Graduates

Posted by PITHOCRATES - February 9th, 2013

Week in Review

Going to college is very expensive.  In fact, tuition costs seem to rise as much as health care cost yet no one blames the colleges and universities for being profit whores.  Odd.  No one ever complains about the high cost of education.  Unless they’re attacking Republicans for not approving more spending to help subsidize what these profit whores at our colleges and universities are charging our students.  Worse, these profit whores are selling a lot of worthless degrees to these unsuspecting students (see Four Foolish Majors To Avoid by Terence Loose posted 2/7/2013 on Yahoo! Education).

Opportunity Killer #1: Liberal Arts

Unemployment Rate for Recent College Graduates: 9.2 percent*

“I don’t think the majority of [liberal arts grads] are going to be employable because they don’t come out of those degrees with any marketable skills,” says Heathfield. “But even worse than that, they spend the money to go four years to college and then get a job that pays $30,000 a year with no upward prospects.”

Opportunity Killer #2: Philosophy and Religious Studies

Unemployment Rate for Recent College Graduates: 10.8 percent*

Can you remember the last time you saw a “Wanted” ad that said: “Looking for a really smart person who can solve why I exist”? Neither can we – and we’re guessing even Plato could recognize the need for practical skills. It seems like today’s employers certainly do, too.

Opportunity Killer #3: Information Systems

Unemployment Rate for Recent College Graduates: 11.7 percent*

Quick, what exactly do information systems majors study? Not sure? Neither are most employers, says Heathfield. That’s not to say this degree doesn’t build good skills; it’s just that if you’re interested in computer technology, it’s best to earn a degree that is easily understood, like a bachelor’s in computer science or computer engineering, says Heathfield.

Opportunity Killer #4: Architecture

Unemployment Rate for Recent College Graduates: 13.9 percent*

There are few things as inspirational as a beautiful building or home. That said, thanks to the massive hit the housing and commercial real estate industries took in the past decade, this degree may not lead to a good job outlook.

Apart from architecture what do these degrees have in common?  They don’t have a lot of math or science in them.  That is, they’re easier than, say, degrees in electrical engineering or theoretical physics.  Could this play a part in why students choose these degrees?  These kids who are going away from home for the first time.  To a raucous college campus.  Where there is booze, drugs and sex.  You know, they even rate colleges by their party index.  So, yes, kids choose easy degrees so they can go to college and party.  Where they can enjoy booze, drugs and sex away from the disapproving glare of their parents.  Even earn a starring role in a Girls Gone Wild video when they take the partying up a notch on spring break.

So when students protest in an Occupy Wall Street movement because they can’t get a job this is why.  A lot of them have degrees in these foolish majors.  Which on top of President Obama’s economic policies is not a recipe for gainful employment.  But these kids will have those great college memories.  Which they will be reminded of.  Every time they can’t make a payment on that colossal student loan debt that those good times cost them.

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Congress keeping Student Loans Cheap for the Youth Vote while Increasing the Cost of Tuition

Posted by PITHOCRATES - June 30th, 2012

Week in Review

It’s an election year.  And both the Republicans and the Democrats are trying to garner the youth vote.  By making it easy for them to accumulate a massive student loan debt for what may prove to be a worthless degree in today’s economy.  Because of the highest unemployment since the Great Depression.  If you compare the U-6 unemployment rates.  Which is currently still north of 14%.  So it’s hard for new college graduates to find a job.  Especially for those with degrees in the liberal arts and the social sciences.  Which just aren’t in high demand in a high-tech economy.  But cheap student loans translate into happy students.  Later they’ll be disgruntled college graduates.  But the politicians don’t care about that.  Because at the time of the election they’ll be happy and grateful students looking to thank someone with their vote (see How Cheap Federal Loans May Harm Students by Rick Newman posted 6/25/2012 on US News).

The cost of a college education has been rising by about 9 percent per year over the last decade, more than three times the overall rate of inflation…For many families, education inflation is more onerous than the skyrocketing cost of healthcare, since you can’t buy insurance that pays for college.

Several factors are pushing tuition costs up, including cutbacks in state funding and an increasing number of students competing for university spots. But another pernicious cause may be a sharp increase in financial aid available to students, especially federally subsidized grants and loans…

That’s a huge commitment to college education, and a seemingly smart way for Washington to prioritize spending. Yet many experts say that all that aid artificially increases demand for a college education and the money available to pay for it, which pushes prices up. There was a disturbing parallel in the housing market a few years ago, when interest rates kept artificially low by the Federal Reserve, along with lax lending standards, generated a flood of money available for mortgages. That helped push home values far above healthy levels, creating the housing bubble that began to burst in 2006, triggering a brutal recession.

Employment at colleges and universities, meanwhile, has increased consistently over the last decade, in sharp contrast to the cutbacks that have occurred throughout the private sector and in state and local government. That suggests that there’s little cost pressure forcing universities to become more efficient, as many companies have been forced to do.

No one ever talks about the education bubble.  But after the subprime mortgage crisis we had a Congressional investigation and passed new regulations (Dodd-Frank).  And to address the high cost of health care we’ve attacked doctors, hospitals, private health insurance companies and pharmaceutical companies.  Even passed Obamacare (by saying the tax wasn’t a tax).  Yet educational costs are rising higher than even health care (at least from a parent’s perspective) and there’s no Congressional inquiry to find out why.  There are no administrators called before Congress to explain their excessive spending or the exploding costs of tuition that pays for that spending.  Or why they are even hiring more people while the private sector gets by with fewer people.  No.  Higher education gets a pass.  Why?

Because our colleges and universities teach our young students the most important thing in life.  To vote Democrat.  That’s why higher education gets a pass.  The Democrats always do well with the young and the college educated.  Especially those in the liberal arts and the social sciences.  Those courses without a lot of math.  Leaving the students a lot of time to have the time of their lives.  And to participate in the political activities of their leftist professors.  Those professors in the liberal arts and social sciences.

Still, the Republicans hope by making this a bipartisan action that they will deny some of these student voters from the Democrat column come election day.  Showing they can pander just as well as the Democrats.

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Obama Attacks Colleges for High Tuition Costs and Irks College Administrators

Posted by PITHOCRATES - January 28th, 2012

Week in Review

In an odd move President Obama has attacked colleges for the high tuition costs.  Odd because colleges overwhelmingly support Democrat candidates.  Colleges are like public sector unions for all intents and purposes.  And he would never ask public sectors to cut their budgets.  Democrats never attack the colleges for the high cost of tuition.  They attack people who don’t approve higher taxes for higher education.  But Obama attacks colleges.  Leaving college administrators dumbfounded (see College presidents pan Obama cost-control plan by the Associated Press posted 1/28/2012 on the New York Post).

Fuzzy math, Illinois State University’s president called it. “Political theater of the worst sort,” said the University of Washington’s head…

Illinois has lowered public support for higher education by about one-third over the past decade when adjusted for inflation. Illinois State, with 21,000 students, has raised tuition almost 47 percent since 2007, from $6,150 a year for an in-state undergraduate student to $9,030…

Bowman said the undergraduate experience can be made cheaper, but there are trade-offs.

“You could hire mostly part-time, adjunct faculty. You could teach in much larger lecture halls, but the things that would allow you achieve the greatest levels of efficiency would dilute the product and would make it something I wouldn’t be willing to be part of,” he said.

If you crunch the numbers that’s $189,630,000 ($9,030 X 21,000) Illinois State takes in each year from their undergraduate students.  That’s a lot of money.  But it excludes donations.  And federal and state aid.  Which when added all together pays for administrative workers, janitors, administrators and, of course, professors.  Which makes you wonder where all that money goes.  The $189 million.  The donations.  And the federal and state aid.

Of course, everyone knows where it all goes.  Where it always goes.  Pay and benefits.  In particular, salaries, health care and pensions.

People love to work at these colleges.  Because of all that money.  You can’t get this in the private sector.  Which is why pay and benefits in the public sector, including these colleges, are far better than in the private sector.  Because they always justify their ever increasing tuition costs on the imperative to educate students to compete in the high-tech world of tomorrow.  While those working in the high-tech world can’t make similar pleas so their customers will pay higher prices for their high-tech products.  No, they can’t do that.  For that would be greedy.  But colleges can.  While no one calls them greedy.

And if you argue against colleges you sound like you’re against winning the future.  Even though many of these students are getting degrees in art, music, sociology, anthropology, women studies, minority studies, etc.  Which really don’t help to win the future.  But they do provide a lot of jobs on campus.  And a lot of tuition revenue from students who don’t want to take the more difficult degree programs that require math.

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FT91: We vilify doctors, hospitals, pharmaceuticals and insurance companies for rising health care costs but we don’t vilify professors or universities responsible for rising tuition costs.

Posted by PITHOCRATES - November 11th, 2011

Fundamental Truth

Greedy Taxpayers are Blamed for the High Cost of Higher Education

Both health care and tuition costs are rising.  They’re out of control.  Both are crises.  We hear about it all the time.  And we’re doing something about it.  Interestingly, though, we’re trying to solve these crises differently.

We’ve identified villains in the health care industry.  Doctors who order unnecessary procedures.  Hospitals that carry out unnecessary procedures.  Greedy pharmaceutical companies that make seniors choose between food and medicine.  And greedy insurance companies who keep raising their premiums while aggressively denying claims.  All who contribute to the rising cost of health care.

So we know who wears the black hats in the health care crisis.  It’s a little different in the tuition crisis.  Do you know who the villains are there?  We are.  The greedy taxpayers.  Who have nothing to do with the rising cost of tuition.  No.  Our crime is our opposition to ever higher taxes.  So we can subsidize ever more of the high cost of higher education.

The Rich Fat Cats above the Professors live like Wall Street Fat Cats

So why are costs so high?  And why aren’t we blaming those who make these costs so high?  Like we blame doctors, hospitals, pharmaceutical companies and insurance companies?

Universities are awash in cash.  From tuition.  From the state.  From corporations.  From benefactors.  From alumni.  And, of course, from college sports.  A multibillion dollar industry.  That doesn’t pay a dime to the athletes that generate all that cash.  So universities have a lot of cash.  Yet tuition costs keep going up.  Why?

What are the costs of a higher education?  There are classrooms.  But these are long-term fixed assets.  That last decades without any improvements.  There are textbooks.  They’re very expensive.  Rarely less than $100.  Which is odd.  Because it’s rare to find a book at Barnes and Nobel for more than $100.  So that’s a profitable enterprise.  Textbook publishing.  While all other publishing is bleeding red and going out of business.  And there are, of course, faculty.

The life of a university professor is pretty sweet.  You get to hide from the real world on campus.  You have great working hours.  You get a lot of time off.  Sometimes all summer.  And have graduate students do all of your busy work.  It’s a charmed life.  And students pay them well for it.  And once they get tenure they can pretty much do whatever they want.  And no one will ever fire them.  No matter how many of their graduates can’t find a job.

And then you have all the rich fat cats above the professors who do even less.  Who drive the same kind of cars the Wall Street fat cats do.  And live in the same kind of houses the Wall Street fat cats live in.  But no one protests these rich fat cats.  Who got rich by ripping off students.  Via the ever rising costs of higher education.

Getting into the University System is like being Knighted in the Old World

The university system is a microcosm of Old World aristocracy.  Getting into the system is like being knighted in the Old World.  And university life is like the Old World.  Where no one challenges your privilege.  Because that wouldn’t be proper behavior.  And lacking the respect due to the privileged class.

Of course this isn’t a problem when you produce great doctors, scientists and engineers who make the world a better place.  We thank those professors who work tirelessly for the betterment of society.  But to those who sucker kids into worthless degree programs?  Where there’s no math?  Only ‘no right or wrong’ essay questions?  And no jobs waiting for them in the private sector?  Well, we’re not quite as enamored with these professors.

Because we’re left to clean up their mess.  From students defaulting on their student loan debt.  Because they can’t get a job.  To the mess they make while protesting Wall Street greed.  Because they can’t get a job.  All the while those responsible for their plights are preparing to raise tuition costs yet again.  As they always have.  And always will do.  Free from blame.  Even though they are more blameworthy than those on Wall Street.

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