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Sunday, August 3, 2014

NY Times: How the Government Exaggerates the Cost of College

New York Times:  How the Government Exaggerates the Cost of College, by David Leonhardt:

The government’s official statistic for college-tuition inflation has become somewhat infamous. It appears frequently in the news media, and policy makers lament what it shows.

No wonder: College tuition and fees have risen an astounding 107 percent since 1992, even after adjusting for economywide inflation, according to the measure. No other major household budget item has increased in price nearly as much.

But it turns out the government’s measure is deeply misleading.

For years, that measure was based on the list prices that colleges published in their brochures, rather than the actual amount students and their families paid. The government ignored financial-aid grants. Effectively, the measure tracked the price of college for rich families, many of whom were not eligible for scholarships, but exaggerated the price – and price increases – for everyone from the upper middle class to the poor.

Here’s an animation that explains the difference succintly. It shows the government’s estimate of how college costs have changed since 1992 — and, for comparison, toggles between the changes in the colleges' published prices and actual prices, according to the College Board, the group that conducts the SAT.

NY Times 1

NY Times 2

Every measure shows costs increasing to some degree, but it’s clear that government’s measure follows the path of published prices. In reality, college tuition has risen less than half as much in the last two decades as the official data suggest.

Matt Leichter, NYT Says People Who Use BLS Inflation Data Are Conspiracy Theorists

http://taxprof.typepad.com/taxprof_blog/2014/08/ny-times-how-the-government-.html

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Comments

I am sure the NYT will ignore this when pontificating about inequality, which will remain for them a pre-tax, pre-transfers, pre-private redistribution, pre-inflation differentials, income effect -- never utilitarian consumption.

Posted by: MG | Aug 3, 2014 5:11:59 AM

High tuitions moderated by all sorts of scholarships, grants and the like is one of the biggest changes since I started college in the summer of 1966. Tuition at that state university then was $100 per quarter, irrespective of how many courses I took. And I recently compared textbook costs. The one I used for three quarters of engineering physics cost $8.50. The equivalent is now $160. Do today's students benefit from the difference between my book's black-and-white illustrations and the new book's often pointless color illustrations? I doubt it.

I can't even recall any assistance being offered. Why should there be? At the then-minimum wage of $1.25 an hour, I could pay for an entire quarter's tuition with 2.5 weeks of full-time, minimum-wage work. With summer work and part-time work during school, all the costs could be covered.

Now we have vastly inflated tuition costs along with all sorts of schemes to let students evade those high costs if they jump through the proper hoops. I'm not sure that is an improvement, particularly when the results are compared. I graduated almost broke but debt-free. How many students do that today?

Other areas don't impress either. I was required to take six quarters of PE, often in dingy old buildings. But I learned from that. My swimming class accomplished what it intended, leaving me virtually drown-proof. Today's students don't have to take any PE at the same school, but they do have to pay the cost of a huge, $20-million activities center. The real winners of that are, of course the rich students who don't need to work not those poorer who work every spare minute to be in school. And yet the poorer students have to fund that center.

All in all, no matter how fast the costs have risen, much of the change isn't an improvement. We've taken a system that allowed almost any capable student to earn their own education and transformed it into one that teaches dependency and leaves all but the richest students heavily in debt.

That's bad and it's not being helped by federal statistics that seem intended to create yet more programs to create yet more dependency.

Posted by: Michael W. Perry | Aug 3, 2014 7:16:51 AM

So? The cost is rising and the government (taxpayers)are paying more. What is the point of article? Really poor article.

Posted by: Keith | Aug 3, 2014 10:42:42 AM

Disingenuous pap.

- Outstanding student loan debt in 2000: $200 billion. Today? $1.2 to $1.3 trillion

- Average student loan debt (undergrad) in 2000: about $12k to $13k, depending on the study. Today? $30k to $33k.

- Student loan defaults in 2000: about 5-6%. Today? 11 to 13%, depending on the cohort, even though sundry income-based repayment plans can effectively mask and suppress the true default in perpetuity. This is the highest default rate of any consumer debt, by a wide margin. Moreover, only about half of all outstanding student loans are even in active repayment! That's right: 50% of all student loans are in forbearance, deferral, or default - and about 1 in 3 of those active repayment loans are currently delinquent (>90 days late).

- Average hourly starting salary in 2000 (in 2011 dollars): about $23/hour. Today? About $20/hour (in 2011 dollars).

Etc, etc, etc.

Posted by: Unemployed Northeastern | Aug 3, 2014 3:55:34 PM