Michael F. Shaughnessy
Senior Columnist EdNews.org
Eastern New Mexico University

Richard Vedder is Director, Center for College Affordability and Productivity and Visiting Scholar, American Enterprise Institute and Distinguished Professor of Economics, at the Ohio University.
In this interview he responds to questions about one of his latest books " Going Broke by Degrees" wherein he discusses the costs of a college education in America.

1) Your most recent book "Going Broke by Degrees" reflects the vast amount of money that it takes to procure a college education in the USA. What prompted you to write this book?

I have spent 40 years in higher education, and have been struck about how differently universities behave compared with other organizations in our society. So I decided to write a book about it.

2) In spite of scholarships- both academic and athletic, I still had difficulty getting through college. How can we expect the poverty stricken in our country to achieve upward mobility?

Sharply rising tuition fees, along with a de-emphasis on need-based financial aid, has indeed worked to make our best universities more upper class enclaves, certainly not in keeping with American egalitarian ideals.

3) In general, where does most of the money for universities and colleges come from?

Most of the money comes from "third parties" --largely governments (state appropriations, federal research grants), but also to a meaningful extent private gifts and grants. At some schools, notably teaching oriented two and four year colleges, including some private liberal arts colleges, tuition fees constitute a large portion of revenues --in some cases, over 50 percent. Tuition fees are the dominant revenue source for those attending for-profit schools like the University of Phoenix.

4) The United States is dealing with a number of illegal aliens right now...if these individuals were to become citizens, what would happen to colleges and universities, and how would they cope with this influx of new students?

The illegal alien issue is an intriguing one. Actually, some informal evidence suggests that a significant number of illegal aliens already attend college --the issue is, should they pay in-state or out-of-state tuition rates?
A very large proportion are Hispanic, and higher educational participation is very low in the Hispanic community, so my feeling is that we are not likely to face a flood of new applicants amongst this population in most of the nation if the illegals attain legal status. Exceptions, however, probably exist in a handful of important states with large illegal populations.

5) The cost of a community college as opposed to the cost of Ivy League schools is significant. But is the quality of instruction really the same?

Who knows the answer to this question? Is the "value added" from college attendance greater or lesser in Ivy League schools versus less prestigious four year schools or even two year schools? Colleges do not measure the stock of knowledge of incoming students very well, and seldom if ever measure what they know when they leave. Some limited testing by the Intercollegiate Studies Institute suggests that learning may be equal or greater in the less prestigious schools as in the Ivy League ones that cost more. My guess, however, is that the level of rigor in instruction is significantly higher at the Ivy League schools, but I would be hard pressed to prove it.

6) When college students pay for a "name" university- such as Columbia or Yale- why is there a cost differential between those name colleges and say Northwestern or the University of Illinois as opposed to colleges in Montana or Idaho?

Among private schools, the variation in the perceived quality of the school is far greater than the variation in fees. George Washington University, a fine school but not considered a top one, charges as much or more than Harvard. Top schools as ranked by US News and World Report --Harvard, Yale, Columbia, Northwestern, etc. -- charge about the same or only a bit more than schools with a significantly lesser reputation --Boston University, George Washington University, Saint Louis University, Southern Methodist University, etc.

The big difference is between public and private schools, although out-of-state tuition at top public schools (U of Michigan, U of Virginia, Cal-Berkeley or UCLA) often is not dramatically lower than at quality private schools Again, without good measurement of results, who knows if tuition differentials are justified, too large, or too small?

7) Many universities blame faculty salaries for rising tuition costs. Is this true or are the salaries of administrators significantly increasing also?

It may seem self-serving as I have been a faculty member myself, but faculty salaries are typically less than 20 percent of the cost of most large institutions, so the rise in salaries is only a modestly important factor in tuition increases. Administrative salaries at the top on average have risen more than faculty salaries in the last decade, so is a factor of some importance in tuition increase. More importantly, over time administrative staffs have grown enormously in size, far more so than faculty size.

8) What is the average salary for a college professor in the U.S.? The average salary for University Presidents? And are students getting a fair return on their investment?

I don't have an average for these groups; a majority of college professors make between $50,000 and $100,000 for nine months work, although salaries above and below that range are not uncommon. University president salaries vary enormously, although a majority are between $150,000 and $500,000 a year. The era of the million dollar university president and $250,000 professor, however, is well underway, a trend that may erode somewhat public confidence in higher education, and calls for increased financial support.

9) In general, speaking very globally, over the past 50 years, is the cost of a college education worth the investment?

Very generally, for those college students completing college degrees in the last 50 years, college has been typically a very good financial investment. However, remember that roughly one-half of the students entering college do not graduate in a timely manner (up to six years for those pursuing bachelor's degrees). Also, my research makes me increasingly skeptical that new public investments in higher education have a high pay off. A case can be made, indeed, that we are somewhat "over-invested" in higher education -- too many students go who are likely to fail.
10) Have things changed in this regard since the year 2000?

The cost- benefit ratio is becoming a bit less favorable to college students --costs are rising faster than the earnings differential associated with college degrees. Whether that is a long term trend is still uncertain.

11) In general, how does the economy deal with the large amount of debt incurred by college students? Graduate students? Doctoral students?

To this point in time, the college debt problem is small in relation to the entire national economy, although it is increasingly important to some college borrowers, as the ratio of debt to current income for recent college graduates rises.

12) In medicine, there seems to be continual on going professional development education. Does this "add on" contribute to even physicians " going broke by degree?

Physicians are graduating with huge debts, and have several years of low earning years after receiving their degree, so the cost problem here is getting to be very large, independent of the issue of the cost of continuing education.

13) Are there fields where it is simply foolish to pursue a college degree? I am thinking of English and philosophy majors perhaps?

There are certainly huge earnings differentials that are subject-related. A student who studies philosophy or English should do so because she really loves the subject and accepts the fact that that love is likely to impose significant financial costs unless she ultimately pursues a career unrelated to those disciplines --as often is the case.

14) How can interested readers get a copy of your book?

My book Going Broke By Degree: Why College Costs Too Much is available from major on-line booksellers like amazon.com, or from aei.org.

15) What are you currently working on?

I have done a book on Wal-Mart, and now am exploring issues relating to economic equality and growth in our nation. I am thinking of writing my next book on whether we are over or underinvested in education in the U.S. at all levels -- K-12 as well as higher education.

16) What question or questions have I neglected to ask?

You have asked enough!!! Hope this helps.

Published March 5, 2007