A New Solution to Rising Tuition Costs

We’ve blogged in the past about the college tuition inflation. Now some students think they may have a solution.  FixUC, a student organization based at UC Riverside, wants the university to stop charging tuition and instead take 5 percent of students’ yearly salaries for the first 20 years after graduation.  “Charging students when they don’t have money doesn’t make sense,” says Chris LoCascio, the group’s leader. “In 20 years, our plan would double the amount of money coming into the UC system.”

The Economist points out some problems with the plan:

If universities become more income focused, will low-yielding, but socially valuable fields like philosophy wind up short of resources? To some degree, the university-for-all model already undermines our idyllic version of university. As more of the population goes to university, and must pay for it, more esoteric subjects naturally become less popular.

A trickier concern may be what happens if this approach is not implemented everywhere? If you know you will study engineering and earn a high salary wouldn’t you then opt for a school with a fixed, up-front cost—assuming that means you’ll come out ahead? Then would all the talented engineers go to other universities and potentially undermine California schools?

Your thoughts?

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  1. Kelsey says:

    This sounds like a good idea to start, until I do the hard math. Even at the base salary I make now, I would end up paying $13,000 more off of a 5% – 20 year payment plan. Maybe they should consider a 10 year plan, that doesn’t start until 5 years after graduation.

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    • Jeff says:

      Don’t forget that you shouldn’t expect to pay the same amount of tuition because you’re paying in future dollars. This is the same as receiving lottery winnings in a lump sum or paying cash for a house instead of getting a mortgage. So it’s quite possible that paying $13k more actually ends up being less to the university.

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  2. David says:

    This would be an interesting experiment, while there may be motivation for people inclined to higher paying degrees to go to a fixed cost university, it would encourage the university to actually figure out what skills students need to land the higher paying jobs. I know a lot of people in my field (software engineering) that were learning obsolete programming languages at their college because the professors thought they were interesting or weren’t keeping up with the times. This would encourage them to find ways to maximize the earning potential for their students.

    I think you would probably face opposition politically though as after you graduate and you are forced to pay 5% of your salary for 20 years some would consider it indentured servitude.

    I think it is more likely that the efforts of https://www.coursera.org/ or http://www.khanacademy.org/ will bring about the lowering of tuition cost. If the skill/abilities of students becomes valued more than a piece of paper stating some prestigious university they went to, why would anybody pay a university any money when they can get the education for free online.

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    • Skip Montanaro says:

      > I think you would probably face opposition politically though as after you graduate and
      > you are forced to pay 5% of your salary for 20 years some would consider it indentured servitude.

      And paying off massive student loans isn’t indentured servitude?

      This idea introduces all sorts of interesting questions. Here are a few off the top of my head:

      * Should the university tighten its admission requirements to improve the odds that it graduates students with higher earning potential?

      * What to do with students who drop out or transfer?

      * Once admitted, how hard should the university work to graduate its students?

      * I think philosophy is actually a decent major since it prepares you for all sorts of things after graduation. I wonder about art history though… Should you scale the costs based on some standardized evaluation of the earnings potential of various degrees?

      * What do you do with people who, for whatever reason, don’t enter the work force?

      * What do you do with people who game the system and work for five years as a barrista at Starbucks, then go on to get a high-paying job?

      * How do you handle graduate school, Peace Corps, etc? That is, people who don’t get a B.A. or B.S. and immediately enter the workforce.

      * What might such a plan do for the ability to go to college? I suspect it might improve it.

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      • David says:

        Your point about gaming the system is spot on … what constitutes a salary? I am sure some would earn an engineering degree and then work for a family business making minimum wage but get all of their expenses paid by the company for food/clothing/shelter/transportation and/or compensation in the form of a CD or bonds that don’t mature until after the 20 years of time have expired. I imagine it would be hard to come up with something like this that couldn’t be gamed.

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      • JY says:

        I don’t see any reason why one would choose to game the system by taking a lower paying job outside their intended field. There is a lot of risk in career changing for older workers and it only hurts their earning potential in the long-run.

        That being said there could be issues with ‘back-loading’ salary, or other pieces of compensation like stock that could be more difficult to value.

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    • Sam says:

      If the skill/abilities of students becomes valued more than a piece of paper stating some prestigious university they went to, why would anybody pay a university any money when they can get the education for free online

      Finding out what skills and abilities job applicants actually have is difficult and expensive. Paper from a prestigious university tells me that you were good enough to get admitted, and were able to convince the examiners that you were worth a degree, and the examiners have a reputation that I trust.

      If you show up and tell me that you’ve watched a bunch of online videos and done some problems, I don’t know whether to believe you or not. I can examine you myself, of course, but that’s expensive and time-consuming for me, so I’m probably going to ignore you in favor of the conventionally educated guy in the next seat. Of course, if you show up and say “I watched these videos, learned this stuff, and here’s this fantastic thing I did”, I don’t care so much about your education, as your fantastic product is going to get you the job.

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  3. Doug says:

    Even if this were a good idea for the schools (it’s not), who would finance the severe cash flow shortage? Staff will not defer pay, neither will vendors. Construction and bond payments cannot happen. Educational demand would skyrocket, with no funds to provide that education.

    Of course this also smacks of indenture, which should turn most stomachs.

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  4. Michael Rasmussen says:

    Make it optional. Those who can pay up front do so. Those that can’t or won’t take on a 20 year variable value debt.

    Or divert some funds from defense spending to education.

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    • Doug says:

      Adverse selection is a problem for this program under the best of circumstances. Making it optional within the campus would only make that worse.

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  5. shawn says:

    There was a series of books on this matter, the unincorporated man
    by Dani Kollin & Eytan Kollin. Individuals were corporations that gave shares of themselves to others.

    The question is whether this is self slavery…

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  6. Mike B says:

    Best solution is to only offer the post-paid plan in fields where the student will stand to get a reasonably well paying job. This will align public policy to support economically productive careers instead of those that are likely to consume future state resources and reduce international competitiveness.

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  7. Dave says:

    I like this idea.

    I work at a small independent college. So much effort is currently going in to reducing costs/increasing enrollment and retention that the quality of the education is suffering.

    There are many people in college that have no business being in college.

    Classes which teach important principles are rushed and overcrowded.

    Sometimes it feels like the value of a 3/4 year degree is no better than an associates degree.

    If the focus is on the quality of the “product” (the quality of the graduate… which should affect the earning potential), all of a sudden there is less of a push to accept anybody and have huge class sizes. There will be more individualized attention focused on fewer, key students. If a student isn’t cutting it in a particular area of study, they can be encouraged to seek a different area of study or drop out (right now, the focus is on retention at any cost).

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  8. Robert Waiganjo says:

    What better way to invest in someone’s future? This can be made optional and be supported by equity funds. It will challenge careers to be economically viable and develope a system that will be motivated in having succesful students. True meaning of concerted effort.

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