Carolina is a high cost university
RALEIGH — The US Department of Education has begun accepting applications from former college students in hopes of forcing taxpayers to repay their loans. President Joe Biden’s loan transfer diktat is one of the worst policies of modern times: hugely expensive, blatantly illegal, and hugely unfair to the millions of borrowers who have worked hard and sacrificed so much to pay off their debts.
I hope the policy will be overturned by the court. He fully deserves to be. Today, however, I want to refute a frequently made argument for it: that it will reduce the cost of higher education in America. No, it will increase the cost. This is clearly one of its objectives.
Although we sometimes use the terms “price” and “cost” interchangeably, they are different things. The price of a good or service is what a consumer pays to acquire it. The cost of a good or service is the total of all resources used or given up to produce it.
In higher education, the price paid by students is usually less than the total cost of their education. Indeed, third parties help defray the costs, including private donors, federal taxpayers (via grants and subsidized loans), and state taxpayers (in the case of public universities or private universities in states like North Carolina that provide the equivalent of college vouchers).
I will illustrate this point by comparing the University of North Carolina at Chapel Hill to five other leading “public” institutions: the University of Virginia, the University of Florida, the University of Michigan, the University of California at Berkeley and the University of Texas. For each of them, I extracted comparable financial data from the Ministry of Education’s Integrated Postsecondary Education Data System (IPEDS).
The prices charged to students by Chapel Hill and other UNC institutions have long been among the lowest in the country. According to IPEDS, tuition, fees, room, board, and other costs for an in-state student at UNC-CH averaged $24,770 in 2020. Among the six peers surveyed, only Florida charged less, at $21,431. Berkeley was the most expensive, at $41,473.
In North Carolina, therefore, we certainly maintain a policy of low fees in our public universities. This does not mean that we are maintaining a low-cost policy.
In fact, of the six public Ivies I looked at, UNC-Chapel Hill had the highest spending on essential functions per full-time equivalent student: $78,488. Michigan ($74,437) finished second. The lowest spenders were Texas ($59,810) and Berkeley ($62,063).
Today, the “essential functions” of a large public university go far beyond the cost of teaching students. Although ancillary businesses such as hospitals are not included here, the totals include research and public service programs provided by faculty and other staff.
Even when I excluded them from the calculation, however, and focused only on expenses for teaching, student services and academic support, UNC-CH costs were still high – $35,578 per FTE student, less than Michigan’s $37,192 but still significantly higher. than Virginia ($31,284), Texas ($30,775) and Florida ($22,481).
Although not considered a public Ivy, Purdue University has become, under former Indiana Governor Mitch Daniels, a national leader in controlling higher education costs. Its 2020 expenditures for instruction, student services, and academic support were $22,537 per student. Purdue’s in-state price to attend averaged $22,812.
What enables UNC-Chapel Hill to operate a low-cost, high-cost model? Donations and grants help bridge the gap, but the main explanation is the generosity of North Carolina taxpayers. In 2020, they paid out $18,414 per student, by far the highest state credit of the universities I studied.
Now back to Biden’s indefensible politics. Transferring student debt from borrowers to federal taxpayers reduces the price of previously purchased education. To the extent that current and future students reasonably expect a similar subsidy, this reduces the actual price they expect to pay. Universities will respond by increasing their budgets, knowing that these increased costs will not be passed on to students and therefore will not discourage enrollment. It’s a vicious circle, unless you work at a university.
John Hood is a board member of the John Locke Foundation. His latest books, “Mountain Folk and Forest Folk,” combine epic fantasy with early American history (FolkloreCycle.com).