The rising cost of higher education is one of the few features of American economic life to remain constant over the last few decades. Since 1978, the inflation-adjusted cost of college tuition has increased 650 percent; here at Stanford, the cost of tuition and room and board now stands at $52,341 per year. Despite many universities’ (including Stanford’s) efforts to increase need-based financial aid, the dramatic rise in the cost of education has left the average college senior with nearly $25,000 in debt. While skyrocketing student debt is cause for serious concern, investment in tuition should not be viewed as a bubble destined to pop. The bubble hypothesis implies that the costs of education now dwarf the benefits, a premise that the facts do not support. Higher education is a good investment for most students, especially those lucky enough to find themselves at Stanford.
The most recent data show that buying a college education still yields a consistently good return on investment. According to the Bureau of Labor Statistics, people aged 25 years or older with a bachelor’s degree made $412 more each week and were half as likely to be unemployed in 2010 than those with only a high school diploma. Recipients of professional degrees did even better, making $984 more each week than people with only diplomas. On average, then, it only takes several years of work for an education to pay for itself in pure dollar terms.
To compare the bubble in higher education to the bubble in housing prices, then, you must believe that aggregate investment in college education does not confer economic value equivalent to tuition. Some have asserted that college degrees promise prestige or contacts, which only influence the distribution of wealth between those with degrees and those without, not the aggregate amount of wealth across society. With each college student convinced that her degree will entitle her to an inside track in the American economy, bubble proponents argue that college loans end up financing an expensive arms race for prestige, granting individual benefits at the cost of aggregate economic productivity.
Yet, this argument is also unconvincing. In a globalized labor market, American workers without degrees will continue to see their wages drop. As a society, we have pinned our hopes on a smarter economy, driven by brainpower rather than elbow grease. Until bubble theorists can explain how to train engineers, programmers, doctors, lawyers and other “thinking” professionals without sending them to places like Stanford, higher education will remain an excellent social investment. Beyond the individual benefits, there is something about Stanford that has consistently generated the exact kinds of economic juggernauts we need to thrive as a nation.
To students and to Americans, the last decade has shown that college is worth its price. Nonetheless, it is perfectly reasonable to inquire as to why that price has climbed so high. One theory holds that the rising cost of tuition simply reflects high demand for education running up against limited supply. To take this a step further, it is not the supply of education per se that is limited, but rather the supply of prestige.
Prestigious schools such as Stanford can maintain their prestige in only one way: by attracting the best students and faculty members. It is they who secure research grants, make donations and raise the pedigree of a university. Likewise, top students and brilliant researchers have a much greater incentive to attend or work for prestigious schools. Only in those environments can they mingle with the best minds in their respective fields and feel confident that they will have the resources they need to conduct their work.
Unfortunately for tuition-paying families, prestige is not free. To stay ahead of their competition, universities are forced to build more state-of-the art labs and recreation centers, which inevitably drive up administrative costs. This effect applies not just to top-flight universities like Stanford, but also to 2nd and 3rd tier schools with nowhere near the name recognition we enjoy here on the Farm.
The ascendancy of prestige at the expense of tuition-paying students and parents has not been without benefits. Many of the intellectual and technological developments of our age would have been impossible were it not for the improvement and expansion of research and education facilities. Some universities have already realized that families can only be squeezed so far. The expansion of need-based financial aid at Stanford in recent years is a prime example of the University’s recognition of the need to enhance equity and access on campus.
As students, as alumni and as citizens, we must realize that rising tuition is not a burden imposed by some unseen nemesis, nor is it a bubble. So rest easy, Stanford: your education here has real and measurable benefits, both to you and to society as a whole.