Will the Cost of College Ever Come Down? September 14, 2009
Paul Partridge discusses the endlessly escalating cost of college.
As the economic downturn pushes states such as California, Michigan, Rhode Island and others closer to the brink of bankruptcy, state-funded, public colleges are under increasing financial pressure. The early returns point to the cost of college going up.
We have a family friend whose daughter was accepted to the University of Michigan. She was seriously considering attending – until the school warned parents that tuition increases were likely and there was no guarantee that financial aid packages would be available next year.
Penn State University is so cash-strapped that they’re asking merit scholars to give their scholarship money back. Currently, students who are accepted into Penn State’s Schreyer Honors College receive $3,500 annual merit scholarships. Penn State is leaning on scholarship parents who have not applied for financial aid to “donate” the money back so the university can give that money to needier students.
The surprising thing is, the strategy seems to be working. Last year the appeal raised $228,000 from 75 families. The other surprising thing is the spin put on the campaign by the Dean, who said, “The students are not being asked to give up their scholarship. We would never ask that of anybody. This [appeal] is to the parents, not the students.”
I wonder if they’re asking Penn State football players to give their scholarship money back.
Tough economic times are affecting private colleges, too – even the most affluent. An article in last Sunday’s New York Times revealed Harvard’s decision to endorse a line of preppy clothing called Harvard Yard (Oxford shirts starting at $165). Is this a return to Boston Brahmin elitism, or simply a savvy business decision by an iconic college seeking new revenue sources on the heels of a 30% drop in its endowment fund?
Finally, a recent blog post by economist Harry S. Dent postulates that, just as we’ve seen the peek of students applying to college, so too have we seen the peek in college tuition. He believes there has been a price bubble in the cost of college, and as we saw with the stock market and the real estate bubble, the cost of college is coming down.
Harry Dent is an unusual economist because his predictions sometimes come true. So his observations on this subject bear consideration. Mr. Dent admits “the price inflation in university tuition has far outstripped virtually every other sector of the economy over the past decade.” He then uses simple supply-anddemand theory to explain why we can look forward to lower college costs down the road. He writes
“… The number of 18-year-olds will begin to fall this year and will continue to fall for about seven years. This means that, barring a sudden surge in the percentage of kids applying to school, demand for education will fall. And with falling demand should come falling prices, or at least moderating prices.”
I’m crossing my fingers and toes, Mr. Dent. New Jersey parents haven’t seen any signs of tuition deflation as of yet, but remain hopeful.
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