College Tuition Grows At Slowest Pace In Decades
ROBERT SIEGEL, HOST:
Here's welcome news to anyone planning to attend college soon or their parents - tuition is growing at the slowest pace in decades. Josh Mitchell of The Wall Street Journal has been reporting on this trend and he joins me now. Welcome to the program.
JOSH MITCHELL: Hi, thank you for having me.
SIEGEL: The cost of going to college on average is still growing, but you report it's growing less than it had been. How big a break is this from what we'd been seeing?
MITCHELL: So over the past year it's been growing at about 1.9 percent. That's roughly in line with inflation. Just to give you some perspective, since 1990, if you look at the broader trend, it was growing at about 6 percent on average per year. So it's definitely a very big slowdown.
SIEGEL: You write about a drop in demand as a main factor. What's behind that?
MITCHELL: So college enrollment has actually declined since its peak in 2010. And that typically happens when the economy improves. When the labor market is doing bad and when unemployment is high, people decide to go to school. They can't find good jobs, and they decide that's a good time to learn new skills and go to school. The opposite happens when unemployment is low and the economy's doing well. And that's what we've seen. People who normally would be going back to school are now taking good jobs and keeping those jobs and they're not going to school. And college enrollment has declined as a result of that.
SIEGEL: Now, you write that this has hit small private colleges, for-profit trade schools and public community colleges the hardest.
SIEGEL: The community college part of that is interesting. What's happening there?
MITCHELL: Yes. Those colleges teach a lot of students that are older students, people who want to go back to school and learn new skills. They're already in the workforce. And so we've seen a decline in enrollment at those schools. I think the other thing that we have to keep in mind is that this is also a demographics story. So if you look at the number of high school graduates, that's growing at a much slower pace. That grew at about 18 percent between 2000 and 2010, but in the first seven years of this decade it's only 2 percent. So the pool of students that would be going to these schools are getting smaller.
SIEGEL: And just to be clear, what you're measuring is the actual cost paid and the rate of what people are actually paying, not the sticker price.
MITCHELL: Right. So this is the net price. So what happens is the colleges set the sticker price, but then they'll give you a scholarship, they'll give you a grant. And so no one really actually pays the sticker price. They pay what we call the net price. And so that's what we're looking at here. And that has been growing at a much slower rate.
SIEGEL: Let's consider small private colleges for a moment. Most of them don't have enormous endowments. If they're lowering the cost of tuition, do you know what services they're cutting to make the books balance?
MITCHELL: Well, some of them are actually closing because they can't work that out. And so, you know, the thing with the small private colleges is that they charge a lot of money. And anecdotally, when I talk to presidents of these colleges, they're saying, look, we're increasingly seeing students and families come to us and saying, you know what? We don't think it's worth it. We're going to send our kid to the cheaper public option down the street. So they're really being hit the hardest in terms of these more price-conscious consumers in the higher education realm these days.
SIEGEL: Could this be one odd year, or do the trends point toward this continuation of tuition rising at the same level as the rest of inflation?
MITCHELL: So this trend has been going on for several years now. If you take a look at a chart of tuition inflation, it has gone down. I think the expectation is that, yes, for another few years, we are going to see these moderate price increases. I have to say one factor here is that public schools are actually getting more direct funding from states. As state budgets have improved, states are renewing their funding directly to colleges, which relieves pressure on them to charge more for students. I think there's a storm on the horizon, though, when it comes to state budgets.
And that's as the workforce ages and as people retire, these health care costs and these public pension costs are going to hit these states hard. And in the next few years, you're going to see more and more budget crises within these states. And when that happens, higher education is among the first things that are cut. So I think a lot of people expect a budget crunch in the next few years in a lot of these states. And that may mean colleges are going to have to start raising their tuition at a quicker pace again.
SIEGEL: That's Josh Mitchell, economics reporter for The Wall Street Journal who writes about higher education. Thanks for talking with us.
MITCHELL: Thank you.
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