Public policies, prices, and productivity in American higher education

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Article Highlights

  • Tuition, fees, and other college charges have increased at more than twice the rate of inflation.

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  • US spends more than $25,000 per student on higher ed.

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  • Must examine effect of public policies on higher ed spending.

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This paper is one of three in a series on higher education costs. The series also includes "Initiatives for containing the cost of higher education" and "Addressing the declining productivity of higher education using cost-effectiveness analysis."

Rapid increases in what colleges charge and what they spend per student have been and remain one of the most controversial aspects of American higher education. Tuition, fees, and other college charges have increased in both the public and private sectors at more than twice the rate of inflation for over a quarter century. Trends over time in what colleges and universities spend per student are harder to discern because recent changes in accounting conventions have made it difficult to compare spending patterns. We do know from various sources, though, that spending per student in the United States is high by international standards. For example, the Organisation for Economic Co-operation and Development (OECD) reports that in the United States more than $25,000 is spent per student in higher education, by far the highest among OECD countries and more than twice the OECD average.[1]

This report seeks to examine the extent to which public policies at both the federal and state levels have shaped these trends in price and cost productivity (measured as spending per student). To accomplish this, the report is divided into the following four sections:

1.    A theoretical consideration of how public and private providers meet the demand for higher education.
2.    An examination of trends over the past 40 years in what colleges charge, how much they spend per student, and tuition as a percentage of educational costs.
3.    A discussion of the various theories that have been put forth for why prices and spending per student have increased so rapidly in the past three decades.
4.    An analysis of the effects public policies may have had on pricing and productivity (measured as spending per student) and a series of suggestions for a series of federal and state policy reforms that could slow the future growth of what colleges charge and spend per student.

Note

1. See Organisation for Economic Co-operation and Development (OECD), Education at a Glance 2012, tables B1.1 and B2.1.

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