It’s a Bird! It’s a Plane! It’s rising Higher Education costs!

The Virginia Restructuring of Higher Education Act of 2005 was a legislative quid pro quo. The state government offered its three crown jewel or “flagship” public universities—Virginia Tech, the University of Virginia, and the College of William and Mary—to receive heightened autonomy—a coveted commodity—in exchange for those universities to meet preordained benchmarks, ranging from augmented academic standards to expanded demographic accessibility. But why? This delegation of power was the intended solution to a growing higher education financial crisis—a crisis that started around 2002.
To put it simply, the cost of Virginia’s public institutions—in addition to most other institutions of higher learning throughout the country—have been rising rapidly. They’ve been rising swifter than inflation. They’ve accelerated faster than much of the goods sector of the economy. In fact, they’ve increased more than much of the expensive service sector’s industries, such as physicians’ services. Since the state’s paternalism was showing financial shortcomings, lawmakers made the decision every parent must eventually make: they started to let go with the hope that their children—okay actually in this case Virginia’s public universities—would use their autonomy to make better fiscal decisions for themselves.
Some of the country’s leading economists are blaming this surge in costs on some unlikely stake-holders: the students. This is rooted in four central causes. First, there’s the “cost disease;” that is, the service industry costs rise faster than those of the goods industry. This is found across many industries, and education—a service industry—is no exception. But why then has its costs increased even more than other service industries, relative to inflation? Some may point to the increasing need at universities to have highly educated labor. As the students’ education requires better technology, so too are employees with better technical skills needed. For example, many universities around the country have wireless networks. This need has required campus staff to have more technical expertise, which renders the employees with a steeper price tag. A third factor is what’s known as the “administrative lattice.” This theory states that over time, university administrations take on more and more responsibility in the well-being of their students’ lives. This then cranks up the costs. A fourth reason is somewhat more subtle. For many businesses, optimizing efficiency is the paradigm for success. The goal is to get as many units as are needed out as quickly as possible and as cheaply as possible. There’s a paradigm shift for education, even though it in many ways resembles a business. Sure, costs per student could be dwindled if teachers taught bigger classrooms. But is it valuable to have every class in a 150 room lecture hall in the name of efficiency? No. Antithetically, smaller, less financially efficient classes are valuable. Ultimately, as education has improved its “value” in areas from class size to technology, these improvements have come at a price.