Over Invested and Over Priced: American Higher Education Today
Publication Date: November 2007
Publisher(s): Center for College Affordability and Productivity
Author(s): Richard Vedder
Keywords: Government Subsidized; Over-Priced; Higher Education; Over-Investment
Coverage: United States
The prevailing view among leaders in the university community is that America is not investing enough
in higher education. A recent survey of the American economy by the Organization for Economic Cooperation
and Development (OECD) echoed that concern. After all, college graduates are dramatically
more productive than those without higher education preparation, and America is falling behind other
nations in the proportion of the adult population with college degrees. National competitiveness and
economic well-being are at risk, or so it is argued.
The conventional wisdom downplays the concerns about rising costs, particularly soaring tuition fees.
One argument is that the cost explosion is an illusion: "net tuition fees" (sticker tuition prices minus
scholarship aid and loans) have risen less dramatically than gross tuition fees (published rates). Americans
think college costs are greater than they really are. Besides, the rate of return of a university education
remains high, since the earnings differential associated with college has risen over the past several
decades in tandem with fees, maintaining a high return on the financial investment.
Yet I think most of these arguments are flawed, even downright wrong. An excellent case can be made
that we are over invested in universities, that too many students attend school, that much of our investment
is wasted. Moreover, the rise in costs to society, to taxpayers, and especially to consumers is
excessive, and has been made more so by well meaning but inappropriate public policies. The law of
unintended consequences looms large in any discussion of America's colleges and universities.