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?


Kelsey

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.

David

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.

Read more...

Doug

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.

Michael Rasmussen

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.

shawn

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...

Mike B

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.

Dave

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).

Read more...

Robert Waiganjo

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.

Joe in GA

Why does it have to be one or the other? Couldn't you be given the option to choose? Couldn't different majors or fields of study charge different rates, that is a philosophy major would pay a higher percent of wages? There just seems to be so many options with this. I think it's a great idea. Doesn't the US Military kind of do this for certain professions already? You get school paid for in return you have to work for them at a lower salary than you would normally get for like 5-10 years.

Jerry Tsai

Dog wags a tail. Tail wags a dog. The Economist points out that people who choose majors that generally yield higher salaries may be better off going to schools with fixed tuition costs, but the UC system could offset that inclination by tilting toward making its schools really friendly toward those types of majors. Net result: In a generation, the schools become science-focused academies.

Joe in GA

I would also like to mention that you could always have a buy out clause where if you become very successful very quickly you could pay all 4 years tuition at once plus maybe some interest.

Chris

I am highly educated, (which doesn't mean I'm actually smart,) and I'm very much in favor of higher education for anybody who wants it. But my question is, what would happen if 100% of the American adult population had a bachelor level degree?

Tom Maguire

I like it. It's gotta be something or the Education Bubble will burst on it's own right? One Trillion Dollars of student loan debt and getting larger by the day.

Andrew

What's the plan for those that go onto grad school?

Sounds like a major disincentive for college athletes that are going to become professional players to graduate.

Prashant P.

This sounds like a GREAT idea. However, you have to take into account present and future values, interest, inflation, etc. I did some rudimentary calculations (correct me if I'm wrong).

Assumptions:
College (Year 1) costs $20,000.
College Costs increase 5% a year.
Student will finish College in 4 years.
College can get a 5% annual return on the money it makes.
Student finds immediate employment with a $50,000 salary (Year 5).
Student will receive a 5% raise every year.

Results: The total nominal cost of College over four years would be $86,202.50. If College is paid while Student is in College, the future value of that money after 24 years will be $245,721.90. Alternatively, if College gets 5% of Student's income for 20 years following graduation, the future value of that money will be $126,347.51. None of this is adjusted for inflation, it is simple taking the money as it is paid and determining it's value at the end of Year 24 assuming 5% compounded annual interest.

If the college took 10% of a student's income, then it would be worth it, assuming those salary assumptions are reasonable (I find them to be rather liberal).

Also, if you paid with college upfront with loans and had to pay 5% on them over 20 years (with interest subsidized while you were in college), you would end up paying a total of $136,536.40. That is just a bit higher than what you would pay paying 5% of your salary (again, a rather liberal salary). Not sure how this is better for the college.

Read more...

Scott Templeman (@tallbonez)

I think the major flaw would be for dropouts (on both ends of the spectrum). What prevents someone from dropping out their senior year with mere credits left on their degree. This kind of program would encourage smart kids to drop out of school if they felt confident they could succeed without a degree. This would also amplify social inequities, as earning potential became a factor in admission decisions. Imagine what it would do to collegiate sports (would more pro caliber athletes skip college to save money?)... the ramifications are endless.

Furthermore, educations would be decided by trying to ride the hot hand professionally and following the latest forecasts and trends. The problem with this is
A. No one can forecast the future accurately
B. Today's hottest field is easily tomorrow's soup line
This would only burst the education bubble sooner.

To say Philosophy & the like would die because there would be no incentive for a useless degree in it seems rather short sighted. The fact is, that these fields do not require academia for perpetuation and evolution in a world of instant communication and universal access to knowledge.

The education industry in the US has always fought tooth and nail tying it's paycheck to the success of it's students, and it's well known that many (but by no means all) flock to work in academia precisely to avoid having to deliver real world results. It's a novel idea but I doubt you could even get someone to test it out.

Read more...

Phil

If it's true that this would double the amount going into the system, then isn't this, aside from interest, effectively a 100% tuition increase? A private insurer should be willing to provide this service to interested students for much less.

Tom

When I graduated in 70, many companies were laying off, and there was a surplus of engineers looking for jobs. Just because engineers are in demand now (and for the forseeable future), doesn't mean they'll always be. Plus in a free market of choices, students should have both options--pay now or buy with time payments. Would you argue that people won't buy houses using mortgages in rapidly appreciating neighborhoods?

Basil White

Why don't we just make the money you pay in Federal taxes 100% deductible from your Federal student loan balance? That way the poor people can pursue high-cost high-return professions like medicine, and encourages high taxable income so the tax cheats gain no advantage.

JL

That is assuming everyone graduate and work. What about drop outs, transfers, and those without jobs after graduation? I'm a college grad but only worked a few years and now is full time stay at home mom, so how is the college going to recoup their tuition from people like me, if tuition is not paid up front?