The cost of health care continues to grow at a pace that threatens the financial health of the United States. The real-estate bubble pushed housing prices up at rates that proved unsustainable.
Yet, as Cristian Deritis points out in a fascinating report for Moody’s Analytics, those well-known price spirals were nothing compared to the cost of college tuition. The price of tuition and fees has more than doubled since 2000. Technological and pedagogical innovations are likely to greatly impact higher education in the next decade, but what makes higher education ripe for disruptive forces is it’s simply become too expensive, and, outside of isolated success, there seems to be no widespread effort to contain those costs. A number of reports link this tuition increase primarily to administrative growth. Whatever, the reason, it is undermining the business model of traditional colleges and universities.
Colleges have maintained their privileged position in American society because of the status and monetary benefits the receipt of its product (a degree) can bring. That long-term advantage remains in place. A new report from Georgetown University, “The College Payoff,” finds that individuals receiving a bachelor’s degree earn 84 percent more over a lifetime than those with just a high school diploma. That college-degree tuition premium was 75 percent in 1999.
But that advantage is being lost in the sea of student debt. The outstanding balance in student loans from tuition has nearly doubled in just the last four years, to $750 billion. (see Chart 1 in Deritis report, mentioned above) Students are finding out the hard way that they cannot make enough in some careers to pay off those loans. (Teaching, anyone?) And colleges are rarely responding in creative ways to help their customers.
Look for students, then, to look for alternatives. Straighter Line, for instance, is on an incredible online advertising spending binge, advertising that it is offers college-level courses at 90 percent less than, well, colleges. Students are looking for more answers like that, other inexpensive distance-education courses, and alternatives like Western Governors University, which grants credit for life experience.
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