Leaders | Higher education

Making college cost less

Many American universities offer lousy value for money. The government can help change that

YOU cannot place a value on education. Knowledge is the food of the soul, Plato supposedly remarked. Great literature “irrigates the deserts” of our lives, as C.S. Lewis put it. But a college education comes with a price tag—up to $60,000 a year for a four-year residential degree at an American university.

A report by PayScale, a research firm, tries to measure the returns on higher education in America (see article). They vary enormously. A graduate in computer science from Stanford can expect to make $1.7m more over 20 years than someone who never went to college, after the cost of that education is taken into account. A degree in humanities and English at Florida International University leaves you $132,000 worse off. Arts degrees (broadly defined) at 12% of the colleges in the study offered negative returns; 30% offered worse financial rewards than putting the cash in 20-year Treasury bills.

None of this matters if you are rich and studying fine art to enhance your appreciation of the family Rembrandts. But most 18-year-olds in America go to college to get a good job. That is why the country’s students have racked up $1.1 trillion of debt—more than America’s credit-card debts. For most students college is still a wise investment, but for many it is not. Some 15% of student debtors default within three years; a startling 115,000 graduates work as caretakers.

If the job market picks up, this dismal picture will improve. But there is another obvious way to increase the returns on a college education: make it cheaper. The price of college has risen more than four times faster than inflation since 1978, easily outpacing doctors’ bills. Much of this cash has been wasted on things that have nothing to do with education—plush dormitories, gleaming stadiums and armies of administrators. In 1976 there were only half as many college bureaucrats as academic staff; now the ratio is one to one.

By the universities’ own measures, this has produced splendid results. Students are more than twice as likely to receive “A” grades now than in 1960. When outsiders do the grading, however, they are less impressed: one study found that 36% of students “did not demonstrate any significant improvement in learning” over four years of college.

The revolution is coming—eventually

In time, digital education is likely to put the squeeze on universities. Online courses can be provided more cheaply than traditional ones, since they do away with the luxury-hotel aspect of college and involve no assistant deans for campus climate. Already, courses from the Massachusetts Institute of Technology (MIT) are available online, free. Ever more online educators will offer qualifications that employers both understand and value. As that happens, traditional universities will have to provide better value for money—perhaps with a mix of online and in-person tuition—or go out of business.

But although you can take MIT courses online, America’s universities do not yet offer many reputable degrees to online students. Technology is taking a while to disrupt higher education. In the meantime, the government can help push down costs. It is already trying to do so. Last year Barack Obama unveiled the “college scorecard”, which will tell students the cost and graduation rate of the course they have chosen. But it needs to go further. Universities should be required to find out how much their graduates earn and, on the basis of that, provide students with a rate of return on their investment.

Universities should also have more of a stake in their students’ success. They already have some incentive to ensure their alumni do not crash and burn: if a university’s student-loan default rates rise beyond 25%, then its students no longer have access to federally backed loans. This nuclear threat has been effective against the most egregious offenders, but until colleges approach that threshold, there is little reason for them to steer students in more remunerative directions. If they were made liable for a slice of unpaid student debts—say 10% or 20% of the total—they would have more skin in the game.

Objectors argue that such changes will doom less remunerative—especially arts—subjects. They will not. Some people will study arts and humanities for the joy of it; others who do so will find gainful employment. But the decision to pay tens of thousands of dollars for higher education is the first big decision most young people take, and one that, for better or worse, will shape the rest of their lives. America should do everything it can to help them get it right.

This article appeared in the Leaders section of the print edition under the headline "Making college cost less"

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