The Higher Education Casino

New research shows that Americans are losing faith in getting a college education.

This long, detailed article shows that the high cost of college in America eats up the wealth effect of higher-paying jobs for college graduates.

Americans Are Losing Faith in the Value of College. Whose Fault Is That?

For most people, the new economics of higher ed make going to college a risky bet.
By Paul Tough, The New York Times, Sept. 5, 2023

…[huge snip]

If you choose a business or STEM degree, your chance of winning the college bet [higher lifetime wealth from a college degree vs. high school degree] goes back up to 3 in 4, even if you’re paying $50,000 a year in tuition and expenses while you’re in college. But if you’re majoring in anything else — arts, humanities or social sciences — your odds turn negative at that price; worse than a coin flip. In fact, if your degree is in the arts or humanities, you’re likely to lose the bet even if your annual college expenses are just $25,000…

Last month, Webber and a colleague published some new research that identified the people who are making out the worst at the casino: students who borrow money to attend college but don’t graduate. In Federal Reserve surveys, half the borrowers who didn’t finish their degrees said they were “just getting by” or “finding it difficult to get by.” [ Many students who start college don’t graduate — about 40 percent of them, by one estimate.] Two-thirds said they would have a hard time coming up with $400 to cover an unexpected expense. Financially, they were not only doing much worse than college graduates; they were doing worse than adults who had never gone to college at all. For these former students, the college wage premium had turned upside down…

The reality, though, is that in the decade ahead, opportunities for those without a postsecondary credential are projected to shrink even further. …The fastest-growing jobs available to those with only a high school diploma, meanwhile, are mostly low-wage service jobs…None of these jobs have a median salary above $31,000 a year. …

By 2030, the American labor market would face a significant shortage of workers with associate and bachelor’s degrees — a shortage of 6.5 million college grads, to be precise…

…the price to the American economy of the millions of missing college grads they are projecting: $1.2 trillion in lost economic output by the end of the decade. [end quote]

The U.S. education system is an outlier among other advanced economies which provide relatively low-cost higher education. The cost of college in the U.S. has been rising much faster than inflation for many years.



We have discussed the defunding of education, particularly higher education, several times. The bottom line remains, to fund higher education to the degree it was funded 50 years ago, would require raising taxes…must not “burden”…



Now that’s a canary in the coal mine warning if I’ve ever seen one.



Boy, that “credential” word sure is important. Being a certified:

HVAC technician
…technician… of any sort.

It sure would fundamentally change the scenario - regardless of incomplete/partial schooling status.


Problem is getting the training, at an “affordable” price. Trade unions used to do training, but they only represent a minority of people in the trades now. Vocational ed has been dropped by many high schools, as their funding, in real terms, has been cut, so what is left is focused on teaching to the “no child left behind” sort of test.

What is left? For profit “tech” schools, that depend on their student’s access to guaranteed student loans, to pay their steep prices. ITT collapsed as soon as it was disqualified from the student loan program.



Not so much, no.

The actual cost of college hasn’t been rising much faster than inflation for quite a while - and during the Covid years, it’s actually fallen somewhat to return back to 2006-2007 levels:

Between 2006-07 and 2019-20, average net price increased by 13% and 7% at public and private four-year institutions, respectively. Those increases reversed in the post-COVID years. Overall, average net prices are largely unchanged, adjusted for inflation, compared to 2006-07.

Sticker prices are still super high at exclusive private non-profit four year institutions. But most students don’t go to those schools; and most students at those schools never pay those sticker prices. The real, net cost of college has been falling for a bit.

One story of rising college costs is a relatively ordinary tale of demand shock. College attendance started rising - heavily - coming out of the 1980’s into the 1990’s, and ultimately peaked in 2010. Seats in college is a relatively supply inelastic good in the short and intermediate term - it’s hard to expand enrollment quickly. So a few million more customers chasing a fixed number of seats ended up being a seller’s market for colleges.

It’s no surprise that the decade of the highest increase in enrollment (2000-2010) was also the highest increase in the real cost of college.

Those days are gone. College enrollment dropped materially in the wake of Covid, but it was never going to keep rising. Demographically, the peak of that age cohort hit about 15 years ago. Covid kind of shocked the system, but the days of rapidly rising net cost of college are probably never coming back. They are likely to end up just being an artifact of the time period where the U.S. transitioned in just a few decades from a country where only about 20% of people went to college (back in the early 1970’s) to one where most high school graduates did.

State cuts to funding of state schools absolutely happened, and were certainly made possible by the gusher of money flowing into colleges during this time. But now that we’re finding ourselves in the reverse situation - too many college resources chasing fewer students going forward? I don’t think that’s going to continue…


That bird has been singing for decades now.


Two things at work: inflation impacting the running costs of a university, and defunding by state government, shifting more of the total cost on to the students. I have posted before the graph that shows the shift at U of M, from the students paying 20% of total cost in the 70s, to the students paying 70% of the total cost now.

As mentioned before, my aunt was a teacher. When she completed her bachelor’s, she found she was not qualified to teach much more than girl’s phys ed. She had to go back for a master’s to teach third grade.

That tidbit informs a report on the network evening news tonight:

The news reported on a woman with a bachelor’s, master’s, doctorate, and a teacher’s certificate. She is a school principle for LA Public. She makes $120,000/year. But her student loans for all those degrees to be qualified to be a public school teacher and principle total $230,000. LA is not notably cheap to live in either. The $700/month payment on her student loans puts a dent in her finances, but, even at that rate, when she retires, probably 30+ years from now, she will still be paying on that loan.

And people wonder why people don’t want to be teachers anymore.

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Some part of that is also due to the changing demographics of the school. In the 1970’s, about 80% of the undergraduate students at U of M were from in-state. Now, that number has fallen to about half. In-state tuition is less than a third of out-of-state tuition.

Certainly states have cut back support for colleges, though. But that doesn’t change the fact that college costs aren’t still increasing faster than inflation. Adjusted for inflation, college costs roughly the same today as in 2006. Skyrocketing college costs appear to have been a limited phenomenon, for about 20 years from the mid-1980’s to the mid-2000’s. The next 20 years were a time of pretty stable costs. I suspect that will continue for quite a while going forward.

A good point. As you said, about half of enrollment at U of M now is out-of-state. Here is a table of enrollment percentages from the mid 60s through 1980.

An article published in January of this year compared in-state to out-of-state tuition.

Those students typically pay a premium for the opportunity. At UM, for instance, tuition and fees for in-state freshmen are $16,736 this year. For out-of-state freshmen, they’re $55,334.

A cynic would suggest that U of M should change it’s model to all out-of-state students, and football players, as that is what is most profitable. One of the articles I read said, the only reason U of M doesn’t do that, is it might raise some hackles in Lansing, because, after all, U of M, and the other state universities, were established for the benefit of Michigan residents.

I agree with all efforts to make college education more affordable. However, I also think a large part of the high average cost of US college education is students/parents chasing status. All to often, people want to go to schools ranked highly by USNews even if it means paying out-of-state or private college levels of tuition. Having been associated with universities for a long time I can say with some confidence that most of the differences in the rankings are either bogus or based on stuff unrelated to undergraduate education.

Education even at the premier public universities need not be expensive. All states that I know of have 2-year community colleges (with low tuition rates) that support transfer of their students to in-state 4-year universities for the final two years. Students who take that route have only the 4-year university listed on their diplomas.

Albaby makes a good point about how sticker prices are not indicative of the actual costs for most students. Sticker prices are what the wealthy kids pay. They help subsidize the education costs for the rest of us. I had a choice between an in-state public university and an exorbitantly expensive private college. After the financial aid packages were put together it was much less expensive to go private.

That would be cynical. UM admits about 40% of in-state applicants, compared to less than 20% of out-of-state. An equivalent undergrad education can be obtained at Michigan State, which admits 80-90% of its in-state applications. The vast majority of Michiganians (Michiganders?) can get a quality four-year public university education if they want.

It’s called “community college”. Most have vocational training. Even short-term training. Costs about $4K/year in most states.

A Michigan example: Short-term Training Programs at Mid Michigan College

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Chasing status does not cause inflation, excess money does. Follow the money, where does it come from, why does it flow so freely?

Since everyone is entitled to education the government feels the need to fund these aspirations. Add up all the grants, scholarships, student loans, and parents chasing status and you have the perfect recipe for inflation.

Put another way, policy is creating excessive demand and the market’s mechanism for dealing with it is to increase the price to the market clearing amount. “It’s Econ 101!”

Why do I pick on policy? Because the policy makers are the only ones that can print money at will, the rest have to earn it.

The Captain


The recent data I looked at last night for U of M is about a 50/50 split in state vs out of state enrollment. This page says State’s enrollment is 77% in-state. University revenue is based on students enrolled, not the percentage of applicants accepted. One article I read last night said that U of M admissions decisions are biased in favor of in-state applicants, as the (L&Ses) in Lansing might get upset if U of M, a state run school, was being run mostly for the benefit of out-of-state students.

And the Gov calls residents “Michiganders”.

For the halibut, I looked at the in/out-of-state mix for Whatsa Matta U: 86.9% in-state, with the vast majority of out-of-state students from Ilinois. Another page I looked at showed out-of-state tuition at WMU being a lot closer to in-state: $13,950 vs $17,639 as of 2021. Compare that to the numbers posted above for U of M: $16,736 this year. For out-of-state freshmen, they’re $55,334. No wonder the only thing keeping U of M from going all out-of-state all the time is the political optics.


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Going back to my youth here in the UK things were different. I was from a poor family so I had the maximum grant (yes, I was paid to go to university) and all my fees were also paid.

In the early 2000’s Tony Blair became PM and wanted 50% of people leaving school to go to university. Many universities expanded rapidly and there was a growth in liberal arts degrees that were pretty useless when it came to getting a job and paying those student loans.

A recently retired drama lecturer was on the TV the other week saying that she had to pass everyone to make the university as popular as possible!

The government plans to crack down on rip off degrees:

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Seems like she owns the decision to take on so much debt. No one made her attend institutions that cost that much and a doctorate is not usually a requirement to be a principal (I doubt she obtained her doctorate before entering the profession).

A Masters in Education Administration from the top ranked school in the country (Arizona State) has a cost of $654 per credit hour (out of state cost). #15 ranked Clemson is $500 per credit hour.

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And Blair is a Laborite, or a “Commie” as the current Shiny narrative would style him.

It will be interesting to see if a Tory regime actually does that. In the US, it was #44. a raging Commie, by the current narrative, who actually moved on for-profit schools that issued worthless degrees. I have mentioned before ITT, a chain of electronics schools, whose degrees were worthless. The school’s eligibility for the student loan program was revoked. ITT, for one, immediately collapsed.

I have history with a for-profit electronics school. Looking at the local community college, there was no mention of student loans, because the tuition was peanuts. Talking to the salesman for DeVry, the student loan was part of the sales pitch. “just sign this loan ap, and you don’t need to deal with the cost”. After two semesters, I started to have this nagging feeling in the back of my mind. Transferred to a community college. Surprise! None of the credits from DeVry would transfer, in spite of the DeVry salesman’s assurances the school was accredited. When #44 cracked down on the rip-off schools, it came to light that the agency these schools claimed accreditation from was itself a scam. Accreditation could be bought with a check.

This is what I have to show for the couple thousand Nixon era dollars I dropped at DeVry. Of course, once in a real college, I had to take a couple electronics courses, at my expense, because the DeVry credit did not transfer.

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You should try to be a bit more objective. Michigan has one of the older populations in the nation (10th in one ranking) with a mean age of 40. In 2010, 14% of the state population was over 65. In 2018 it became 17%.

They don’t have as many young folk as they used to. That’s the main reason the out-of-state student population is increasing.

My aunt only had a masters, and never moved beyond teacher. There are lots of Doctorates in education, the Superintendents of Detroit and Kalamazoo Public, for instance. That Doctorate may well be what got her the principle’s job, and she is on a career path toward Superintendent.

If she was smarter, she probably would have gone to university in some Communistical country in western Europe, that virtually gives away education, like the US used to.


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Yes indeed. We have already had ministers appearing on the news squirming when being asked what universities and what subjects :slight_smile:

The whole education system is geared up to sending as many as possible to university. I’m seeing this with a family member who I wouldn’t consider university material (at least not from the standard of my university days).

We even have tables on the easiest universities to get into:

Some of those mentioned were litte more than colleges of further education twenty years ago. I looked through the list and noted that an ex-employee of mine went to one of them - that explains a few things!

Meanwhile we have a shortage of bricklayers, plumbers, joiners, carers, agricultural workers, etc.

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