RALEIGH – The price of higher education is going up rapidly, both nationally and, to a lesser extent, in North Carolina. But before anyone hits the panic button – again – it would be worthwhile to consider just what this fact means.
Obviously, no one wants to experience rising prices for the goods and services one is planning to buy. As the parent of two (I hope) college-bound boys who derives no income from any university, it should be clear where my personal economic interest lies. But rising prices are market signals. As long as they are free from manipulation by government, either through subsidies or regulations, prices convey crucial and timely information that help people coordinate their actions to mutual benefit.
In the case of higher-education prices, it’s important first to understand what the published data mean and don’t mean. Laura Giovanelli of the Winston-Salem Journal does a good job in this story of explaining that while tuition and fees are rising at North Carolina colleges and universities, the actual prices paid often significantly differ from the apparent ones.
Reporting on a new report from the College Board, Giovanelli wrote that average in-state tuition and fees in the University of North Carolina system rose 6 percent this year, to $4,320. That’s a slightly slower rate than the national average increase for public universities, 6.6 percent. Among private N.C. colleges and universities, tuition and fees average $21,806 this year, up 5 percent.
But these published rates do not reflect the net cost to students and their families, because they don’t include the effects of some scholarships and tax credits for higher education. Nationally, the differences are substantial: public-university students get an average of $3,600 in grants and tax breaks, reducing tuition by 58 percent, while private-university students get an average of $9,300 in grants and tax breaks, reducing tuition by 39 percent. The effect is even more pronounced in the nation’s community colleges, where grants and tax breaks reduce the average tuition cost by a staggering 86 percent.
The College Board provides no net-cost numbers specific to North Carolina colleges and universities, though it is reasonable to expect as least as much of an effect. Indeed, because UNC tuition is lower than in most state university systems, the impact of fixed-amount scholarships and tax breaks would be a bit higher in percentage terms.
After adjusting for all that, of course, university tuition remains a big number. But you can’t evaluate prices without evaluating the quality and desirability of what you are buying. Although I’d attach many caveats to this statement, it is probably true that one major reason the price of higher education is rising faster than other prices is that for many schools and disciplines, higher education is an increasingly valuable investment. The average returns on the investment are such that providers can afford to charge higher prices without killing demand.
The problem with this analysis, however, is that it is all about averages. For many students, unfortunately, the value added by a college education is rather scant, and sometimes nil or negative. Their plight is lost in the mix when you add in the highly valuable investment other students make in their pre-law, pre-med, or engineering education. It’s a classic example of the fallacy of the average.
If the question of whether the value of today’s university education justifies the rising prices is a topic of interest to you, I have a practical suggestion: spend some time this weekend with some of the nation’s most thoughtful and innovative thinkers on the subject. The Pope Center for Higher Education Policy is holding its annual conference on Saturday, October 27 at the Hilton-RTP. The keynote speaker is Dr. Harry Lewis, former dean of Harvard College. Other speakers include university administrators, professors, trustees, and policy analysts. You can peruse the schedule and reserve your spot for the conference here.
The price is $20. Now that’s a bargain.
Hood is president of the John Locke Foundation.