The College Board released its yearly reports on trends in college pricing and student aid today. In-state tuition at public four-year universities, the number that has become the de facto national benchmark of college affordability, rose 4.8 percent from the 2011-2012 academic year to 2012-2013. Numbers of this size have become so routine over the years that they barely register, especially when, as the College Board is quick to point out, the increases in the previous two years were substantially bigger.
But minimizing the importance of a 4.8 percent hike would be a mistake. That’s more than triple the inflation rate during the last academic year, 1.4 percent. Median household income is declining. College can’t keep increasing in price faster than the amount of money people have to pay for college forever, not unless we’re willing to accept a society in which fewer people earn college degrees.
Think of it like this: You step on the scale one day and see that you’ve gained five pounds in the last month. The next month, five more pounds. The next month, five more. You go to your doctor, who informs you that you have a terrible disease that, absent some unpleasant treatments, will cause you to gain five pounds every month until you eventually drop dead from immobility and heart failure. This is hard to hear, so you go home and do nothing, and a month later you step on the scale and you’ve gained another five pounds.
There are two ways to look at this: (1) “Nothing important has happened, because the rate at which my weight is increasing has not changed and I am still alive.” (2) “I am doomed unless I take drastic steps, and the longer I wait, the more painful those steps will be.”
Higher education has been going with (1) for quite some time now. But keeping up appearances has gotten substantially harder since last year’s reports, because in the interim the general public has been made aware that total outstanding student loan debt has exceeding the dramatic sum of--cue Dr. Evil voice--$1 trillion dollars.
This was clearly on the mind of whoever wrote this year’s Trends in Student Aid. The College Board, it should be said, provides a valuable public service by compiling and publishing this data. The numbers are, as far as I know, impeccably accurate. They are also timely, being released much faster than laggard government reports. But the College Board is also an industry membership organization with a vested interest in keeping the public un-panicked about college prices, so it always finds a way to present each year’s fresh crop of alarming numbers with a strong dose of “nothing to see here.”
In 2008, for example, inflation was unusually high during the academic year, due to spikes in energy prices. The College Board made much of this, emphasizing in that year’s report that inflation-adjusted tuition had risen little. A year later, after the financial crisis, inflation actually went negative as energy prices dropped in response to plummeting demand. This made inflation-adjusted tuition rates higher than nominal rates.Suddenly the inflation-adjusted numbers were gone from the College Board press release and the report contained lots of caveats about uncertain nature of inflation-adjusting. 2011-2012 was a terrible year for college tuition, driven in part by huge increases in California. So the College Board made an extra calculation: the average increase in tuition, not counting California. If it has ever calculated the average increase in tuition after throwing out the state with the smallest tuition hikes, I am unaware.
2012 was the year of the trillion-dollar student loan bill. Unsurprisingly, we find a brand-new discussion of total annual loan volume on the first page of Trends in Student Aid:
The total volume of education loans disbursed doubled from $55.7 billion (in 2011 dollars) to $113.4 billion between 2001-02 and 2011-12. Over these years, the number of Stafford Loan borrowers almost doubled, while the average amount borrowed from subsidized and unsubsidized Stafford Loans combined increased by 8%, from $7,627 (in 2011 dollars) to $8,230.
The growth rate in education loans from 2001-02 to 2011-12 was slower than over the previous decade, when the total grew 150%, from $22.3 billion (in 2011 dollars) to $55.7 billion. Moreover, the total volume of education loans disbursed increased by 64% in inflation-adjusted dollars between 2001-02 and 2006-07, and the growth rate slowed to 24% over the next five years.
That’s, um, one way of looking at it. Another way is that in the 1990s, annual loan volume increased by $23.4 billion, whereas in the 2000s it increased by $57.7 billion, and that $57.7 billion is a much larger number than $23.4 billion--147 percent larger, in fact. The smaller recent change in the growth rate is just a function of the fact that the base against which growth rates are measured used to be much smaller, because college used to be much cheaper. After all, the biggest federal student loan volume growth rate in history occurred in the first year of the program, when the dollar values of loans issued went from zero to some number larger than zero, but I don’t think anyone is arguing that today’s loan problems are nothing compared to the bad old days of the 1960s. The College Board is right about loan volume over the last five years compared to the five years prior, but that calculation, perhaps not coincidentally, factors in the temporary bubble in private sector lending that peaked right around the middle of their ten-year window.
These numbers play an important role in the public discourse and it would be better if they were unaccompanied by industry spin.