Colleges are full of it: Behind the three-decade scheme to raise tuition, bankrupt generations and hypnotize the media

The price of a year at college has increased by more than 1,200 percent over the last 30 years, far outpacing any other price the government tracks: food, housing, cars, gasoline, TVs, you name it. Tuition has increased at a rate double that of medical care, usually considered the most expensive of human necessities. It has outstripped any reasonable expectation people might have had for investments over the period. And, as we all know, it has crushed a generation of college grads with debt. Today, thanks to those enormous tuition prices, young Americans routinely start adult life with a burden unknown to any previous cohort and whose ruinous effects we can only guess at.

On the assumption that anyone in that generation still has a taste for irony, I offer the following quotation on the subject, drawn from one of the earliest news stories about the problem of soaring tuition. The newspaper was the Washington Post; the speaker was an assistant dean at a college that had just announced a tuition hike of 19 percent; and the question before him was how much farther tuition increases could go. “Maybe all of a sudden this bubble is going to burst,” he was quoted as saying. “How much will the public take?”

Oh, we would take quite a lot, as it happened. It was 1981 when the assistant dean worried in that manner—the very first year of what was once called the “tuition spiral,” when higher ed prices got the attention of the media by outpacing inflation by a factor of two or three. There was something shocking about this development; tuition hadn’t gone up like that during the 1970s, even though that was the heyday of ascending consumer prices.

Yet at that point, the tuition spiral had more than three decades to go—indeed, it is still twisting upward today. But the way we talk about this slow-motion disaster has changed little over the years. Ever since the spiral began, commentators have been marveling at how far it’s gone and wondering how much farther it has yet to run—“the trend can’t continue,” they say every few years. They ask when the families and politicians of America are finally going to get off their knees and do something about it.

But somehow nothing ever gets done. The trend does continue. And for 30 years the journalists who cover the subject have followed the same pointless script. They have hunted fruitlessly for the legitimate expense that they knew must be driving up the prices. They have chased repeatedly after the wrong answers, blaming everybody and everything except for the obvious culprits. They have related to us the politicians’ plans for bringing the spiral to a stop—plans that everyone can see have virtually no chance of succeeding.

And all along, the larger meaning of the spiral is almost never discussed, as though it were contrary to some unwritten rule of journalistic cognition.

*

Reading back over journalistic accounts of the tuition spiral from the '80s and '90s, you get the impression that all concerned felt it was a wee bit uncouth to dig too deeply into a university’s pricing practices or suspect the sachems of higher learning who presided over them of anything inappropriate. These were the journalists’s beloved alma maters, after all: surely they had our best interests at heart. Surely we could trust the word of university administrators, even though they always—in their determination to make tuition price increases seem rational and sensible—seemed to find a way to blame someone other than themselves.

And so, beginning in the '80s, university administrators, their words dutifully transcribed by journalists, blamed utility bills for soaring tuition. They blamed libraries, which made a certain amount of sense until libraries went dramatically out of fashion in the Internet age—and yet still tuition prices went up.

They blamed professors, of course, since professors are the most visible part of a university and because it’s easy to hate professors. Sometimes university spokesmen would claim that colleges were being forced to spend a lot in order to hire the very best professors, an academic echo of the reasoning corporate America uses to explain fat executive salaries. On other occasions, however, they would claim that they were being forced to spend a lot because professors nowadays were lazy and didn’t want to teach and so they were forced to hire an expanded roster of them to offer all their courses. Both excuses were plausible on paper, and there’s probably some university president somewhere who’s still blaming professors for his insane tuition bills. But these alibis only made sense until the outside world figured out that universities were actually using graduate students and adjuncts to teach their courses and yet still tuition prices were mounting at an insane clip.

Administrators also blamed tuition inflation on onerous government regulations, which (they said) forced them to hire bureaucrats to fill out forms; sometimes they did this even when they themselves had lobbied for the government regulation in question. They blamed students, who were supposedly demanding all manner of luxuries and would not be denied. “Students today want carpeting, they want furniture, they want voice mail,” an administrator at a Nevada university told USA Today for a 1997 story about the tuition spiral. “They want all the amenities that 10, 20, 30 years ago were almost unheard of.” (One wonders if, by that logic, students today “want” life-altering amounts of debt, too.)

And administrators blamed society, which was forcing them to be high-tech and culturally diverse, social improvements that were supposed to be terribly expensive. According to a tuition-spiral story that appeared in The New York Times in 1988,

“colleges say that tuition bills reflect the demands society places on them: to shelter students from drugs and alcohol, to diversify their campuses with more black, Hispanic and rural students, to provide access ramps and elevators for the handicapped, to prepare students for a high-technology society.”

In one of the most curious bits of blame-evasion, a 1990 report commissioned by the College Board actually attributed rising tuition prices to a declining student population. Like all the other excuses, this got university administrators off the hook, but it also raised troubling questions. Ordinarily, reduced demand makes prices go down, not up; that the opposite was happening implied that colleges had the power simply to impose their costs on the student population regardless of that population’s size or wishes. (Besides, when the student population numbers reversed themselves and began to rise several years later, tuition still ascended.) The same report went on to insist that higher ed was an “extremely competitive” industry, but that it had simply “chosen to compete in ways other than price.” They were building really fine gymnasiums in lieu of keeping prices under control—six one way, half dozen the other. This was supposed to be reassuring, but like the stuff about reduced demand yielding higher prices, it should have rung alarm bells all over Washington, clearly indicating that this particular industry was not subject to basic market forces—that regulation and maybe even price controls were immediately required.

The possibility that higher tuition prices were going to pay for rapidly multiplying and yet educationally unnecessary administrators was not really raised in earnest until a memorable page-one series published in 1996 by the Philadelphia Inquirer. This interpretation had the virtue of being accurate: Unlike tenured faculty, university administrations actually have grown by 369 percent since the mid-1970s. (As I have noted before.) But blaming administrators proved difficult for journalists, perhaps because administrators were the very people journalists had been going to for explanations in their tuition-outrage stories. Could their sources actually be the culprits? No way. And so, less than a year after the Inquirer’s series appeared, USA Today ran its own big tuition-shock tale in which the blame was pinned on all the familiar blame-objects: Professors, student demands, technology, gummint regulation. A 1997 cover story in Time magazine—“How Colleges Are Gouging U,” the illustration shouted—barely mentioned administrators at all.

One factor remained constant through all these years of journalistic hand-wringing: Those who wrote about the higher ed price problem kept expecting the Invisible Hand to assert itself and straighten this thing out. Every glimmer of light looked to them like the end of the tunnel: An unusually small tuition increase at Stanford in 1990, for example, was trumpeted on page one of the New York Times as evidence that market forces had worked, that the spiral had ended. Others agreed. In February of 1991, the Seattle Times announced that we had reached the end of the ordeal: “The fact is, middle-class students and parents simply can’t pay any more.” They were wrong, of course. Eight months later, USA Today reported that tuition was spiking upward again, growing by 12 percent that year at state universities. And it pains me to report that an education at Stanford today costs about $60,000 per year, just a little less than the most expensive schools of them all.

What were journalists to do after ringing the alarm bells for so many years without effect? Well, there was one easy answer to this frustrating situation: To discover that there wasn’t really any problem in the first place. That the tuition spiral was entirely reasonable, even if no one could actually explain it. How so? Well, if you examine what has come to be called the “college wage premium”—the difference between what is earned by college grads and high school grads—it becomes clear that someone who finishes four years at a university will eventually earn far more than they spent to go there, even at the crazy tuition prices of recent decades. Today this is a universal way of considering the situation, always leading us to conclude that going to college is “worth it”; that it is a “bargain”; that it “pays off.” But it only seemed to enter journalists’ consciousness in the 1990s, as on the occasion when Gaston Caperton, president of the College Board, explained matters thusly to the Los Angeles Times in 1999:

“He said there has been too much focus on the cost of college and too little on the lifetime returns for four years of investment. Because a college graduate today earns about twice as much as a worker with only a high school diploma, he said, ‘a college education is worth about $1 million over a lifetime.’ ”

The mind reels when confronted with this kind of smugness. One wonders: Is there some identifiable aspect of a college education that yields that million dollar prize—exposure to advanced literary theory, for example? Is there a way to isolate that particular 24-carat nugget and leave the dross behind—all the plush dorm carpeting and the many layers of assistant deans? My guess, though, is that Caperton’s statement meant exactly the opposite of this—that there was no need to inquire any further about the tuition outrage. What it implied, by extension, was that since we now know the final value of a college degree (one million dollars!), the colleges can simply keep raising tuition prices and student indebtedness until they have extracted that amount from their graduates—and only after they have hit that figure will we have cause to complain.

*

Government has been little better than journalists. Over the three decades of the tuition spiral, by far the most forthright antagonist of the inflation-happy colleges was the Reagan-era culture warrior/education secretary William Bennett, who seemed to delight in blunt statements like this one: “Some of our colleges and universities charge what the market will bear. . . . The heart of the matter is that colleges raise costs because they can.” Were some member of the compromise-minded Obama team to talk like that today the centrist earth below Washington DC would gape in outrage and swallow them up.

Unfortunately, angry rhetoric is as far as Bennett went. The solutions he proposed, like all the solutions anyone has proposed over the three decades of the tuition spiral, did the opposite of help. Bennett believed that federal grants fed the tuition spiral; replacing them with loans and restricting the annual increase was supposed to solve the problem. The basic idea here was that if we exposed students more directly to the educational market that Bennett had identified—making them borrow the money to attend—we could then count on those self-interested economic actors to behave as consumers are supposed to and do something about the problem. The policy was “to re-emphasize self-help,” per the New York Times. But this particular market has never worked that way, and the only effect, of course, was to raise up the Himalayas of student debt that are such a familiar part of the landscape today.

The hunt for a market-based solution went on, however. During the presidency of George H. W. Bush, the Department of Justice accused the Ivy League universities of acting as a “collegiate cartel” and conspiring to fix financial aid and hence prices. The antitrust case was settled with a consent decree in 1991; the tuition spiral proceeded as before. (I have written about this elsewhere, in case you’re interested.)

And that was pretty much it—the very last time the federal government tried to get tough with the higher ed industry. Since then, the two parties have gone their different ways on the matter—Democrats today worship education, while Republicans today worship the market, neither of which faith has brought us close to a solution. The efforts of the Clinton administration, for example, were almost unbelievably feeble: With great fanfare, the Democrats streamlined the student loan process, proposed a tax cut for parents who paid for college, and—hooray—cracked down on student borrowers. (“We have tracked down defaulters and made them pay,” Bill Clinton boasted in 1997.)

A low point of sorts was reached in the late 1990s, when Congress appointed a “National Commission on the Cost of Higher Education,” and filled it with university presidents and the head of one of the main higher-ed lobby groups. The report they proceeded to publish in 1998 was an entirely predictable outcome of this staffing decision, I suppose, but still the reader is struck by its resounding impotence. This panel was so pallid it didn’t even amount to a whitewash. On page one of its report, for example, the Commission declared that it wasn’t really interested in soaring tuition at all, except insofar as soaring tuitions might cause Americans to feel “ill will” toward universities. After going on to catalog the usual culprits—blame regulations, blame students—the Commission concluded that there should be—yes!—further study on the matter. (“The Commission recommends that the philanthropic community, research institutes, and agencies of state and local government adopt the topic of academic cost control as a research area worthy of major financial support.”) They also recommended that universities do a better PR job, that they organize themselves to “inform the public” about “the returns on this investment.”

But even that would probably be considered an outrage were it published today. Last year, the Obama administration announced its own “Plan to Make College More Affordable”; the centerpiece was a scheme for doing something analogous to what that Commission proposed back in 1998: building a rating system to inform the public about the returns on college investments. (There was also the obligatory olive branch to the right, in a proposal to “reduce regulatory barriers.”)

The universities responded by going absolutely apeshit. They are happy to talk about the “return on investment” when it’s a vague promise of a million bucks for anyone who pays up and goes to college; when someone actually takes them at their word and tries to measure the claim, it seems that fundamental principles are being trampled.

I hope Obama ignores the wailing of the universities and goes through with his plan, despite the obvious folly of trying to explain people’s relative prosperity by reference to the college they attended instead of their class background. If the president were to expand his approach to include data on the vast and growing size of university administrations and how many courses are taught at each college by adjuncts, his rating system might well be useful.

But there should be no illusions. More information by itself is not going to stop the tuition spiral, not after 33 years. In fact, we can predict fairly easily how this thing will backfire once the government discovers and announces the precise “return on investment” for each institution of higher learning: Like any rational, profit-maximizing entity those institutions will simply continue hiking tuitions in order to capture a larger chunk of that return for themselves.

As the reforms fail and the journalism fails maybe we will figure out that all along there has been a single bad ideological idea behind all of this failure: The notion that the market will solve the problem if we only adjust the controls a little. And as the newspapers of 2020 tell us about an angry new generation of students shouldering an unimaginable debt burden, maybe it will dawn on Barack Obama, by then retired and relaxing on the beach in Hawaii, that maybe we shouldn’t have thought of education as a market in the first place. Maybe college shouldn’t be about individuals getting rich. Maybe there is another purpose.

*

In the long sweep of journalistic commentary on the tuition spiral, relatively few have raised that question. One occasion when it cropped up was in 1986, when the shift from grants to loans was under way, and a spokesman for a higher-ed accreditation group was able to grasp the larger meaning of the change. “A grant conveys the message, ‘We value you and will invest in your future,’ ” he told the New York Times. “The message of a loan is, ‘Go forward if you want, but on your own nickel.’ Loans reinforce privatist, instrumental values, a sense that you’re in college for yourself and that college studies have as an end only what comes later—a job and paying off the loan.”

Let me repeat, as a fact of some significance, that the great tuition price spiral began in 1981. That was the same year in which Ronald Reagan brought his jolly band of deregulators to Washington, in which Congress enacted the landmark Kemp-Roth tax cut, and in which the air-traffic controllers' union went down to humiliating defeat. In 1981 the old order was crumbling, the soldiers of the free market were strapping on their Adam Smith neckties, and colleges all across America were deciding they needed to jack up tuition prices far in excess of the rate of inflation, something they had not done before.

When considering the significance of this point of beginning, a 1987 inquiry into the tuition problem threw up its hands. “Nobody knows why tuition increases lagged behind consumer prices in the 1970s and jumped ahead in the 1980s,” according to an Associated Press summary. But in retrospect I think the answer is obvious. It happened then because these things are all related: deregulation, tax cuts, de-unionization and outrageous tuition inflation are all part of the same historical turn. I acknowledge that, on the surface, this is not an obvious connection: The Reagan administration was always hostile to universities and loved to bemoan the tuition spiral; what’s more, over the period in question, the universities themselves embraced a hyper-leftist public image that helped them distract attention from the catastrophe they have visited upon the nation’s young.

But if we think of these things as part of a larger ideological shift, they all start to make sense. Universities were capable of doing in the '70s what they did in the '80s (and still are doing today), but maybe they didn’t do it then because Americans thought of universities in a different light in those days.

What I mean to say is that the tuition price spiral is part of the larger history of inequality, just as is the ever-rising price of Andy Warhol paintings, or the ever-growing size of the McMansion, or the ever-weightier catalogs issued by Restoration Hardware—and, of course, the never-increasing wages of American workers. As the rewards that can potentially be won by members of the white-collar class have gone from meh (in the egalitarian 1970s) to Neronian (today), it feels natural that the entrance fee for membership in that class should have escalated in a corresponding manner. The iron logic of inequality works the other way as well: Although a college degree doesn’t necessarily guarantee a life of splendor, not having one pretty much makes a life of poorly compensated toil a sure thing. Finding ourselves on the receiving end of inequality is a fate we will pay virtually any price to avoid, and our system of higher ed exists to set and extract that price.

Put it another way: Over the last 30-odd years we have essentially privatized higher ed. In saying this I’m not referencing the defunding of our State U’s (an explanation for the tuition spiral, by the way, that doesn’t get nearly enough journalistic attention). And I am aware that a good chunk of our institutions of higher ed have been private all along. What has changed is that they aren’t “our” institutions of higher ed anymore. Maybe they never were, but not too long ago it was possible to think of them—from Milton Friedman’s University of Chicago all the way down to Michele Bachmann’s Winona State University—as serving some sort of public function. Whether founded by the grace of Rockefeller or by Act of the Minnesota Legislature, they manufactured good citizens; they taught us scientific farming techniques; hell, they built the atomic bomb and created the Internet. This is why our government subsidized (and still subsidizes) them with grants and earmarks and tax abatements and preferential treatment of every description. But the other part of the bargain doesn’t work the way it used to anymore. Everyone in the age of inequality knows that the purpose of a college education isn’t to benefit the nation; it’s to give the private individual a shot at achieving a High Net Worth.

Agreeing upon that, everyone from state legislators to the Secretary of Education naturally began to ask, Why should I pay for someone else to get rich? Those people need to foot the bill themselves.

Agreeing upon that, the colleges and universities reconceived their mission and began to put a more accurate price tag on what the consensus now acknowledged that they were selling.

The whole enterprise changed. One term they used for it in the early days, according to a landmark 1988 magazine article by Barry Werth, was the “Chivas Regal argument”—the idea that college was a luxury good and should be treated as such. Forget all the bushwah about diversity and lazy professors driving up tuition; price increases in those days became virtually an end in themselves, something colleges did simply to burnish their prestigious brand image. Werth quoted an administrator from Lehigh University who put the new philosophy succinctly: “If it’s going to be a world of haves and have-nots, we sure intend to be among the haves.”

That is the offer our ever-more expensive colleges extend to their students as well: in a world of rich and poor, the only choice before you is whether or not you intend to purchase a place among the haves. And these days even the once-sanctimonious New York Times runs stories openly treating the most expensive colleges as brands, as class signifiers.

Economists who write about class issues usually depict higher ed as a force for solving the inequality problem, not for making it worse. Other big thinkers tell us that universities are fountainheads of innovation and creativity, the only things we really have going for us as a nation. Those attitudes, plus the amazing deference our professional and political classes feel toward the hallowed groves of academe, probably explain why this industry has been able to get away with 30 years of something close to price gouging, a practice that would never be tolerated from any other provider of life’s necessities. They also explain why American students have done virtually nothing to stop the spiral while students elsewhere take to the streets in fury when threatened with the tiniest tuition increases.

Because in this country college fulfills a different role. Even if those peaceful campus quadrangles were originally laid out by Quakers or by the egalitarian Thomas Jefferson, we all know what they signify today: They are the central symbolic device for explaining inequality. College is where money and merit meet; where the privileged learn that they are not only smarter than everyone else but that they are more virtuous, too. They are better people with better test scores, better taste, better politics. College itself is the biggest lesson of them all, the thing that teaches us where we stand in a world that is very rapidly coming apart.