Why is college tuition rising so much faster than prices in general, faster even than the unsustainable rise in home prices that led to a housing bubble (see top chart above)? Well, here's one explanation from the Goldwater Institute's report "Administrative Bloat at American Universities: The Real Reason for High Costs in Higher Education":
"Enrollment at America’s leading universities has been increasing dramatically, rising nearly 15 percent between 1993 and 2007. But unlike almost every other growing industry, higher education has not become more efficient. Instead, universities now have more administrative employees and spend more on administration to educate each student. In short, universities are suffering from “administrative bloat,” expanding the resources devoted to administration significantly faster than spending on instruction, research and service.
Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent. Arizona State University, for example, increased the number of administrators per 100 students by 94 percent during this period while actually reducing the number of employees engaged in instruction, research and service by 2 percent. Nearly half of all full-time employees at Arizona State University are administrators (emphasis added).
A significant reason for the administrative bloat is that students pay only a small portion of administrative costs. The lion’s share of university resources comes from the federal and state governments, as well as private gifts and fees for non-educational services. The large and increasing rate of government subsidy for higher education facilitates administrative bloat by insulating students from the costs. Reducing government subsidies would do much to make universities more efficient."
MP: For public universities the administrative bloat is much worse than at private colleges - administrative positions grew by 39% between 1993 and 2007, almost four times the 9.8% increase for instructional positions, see bottom chart above. At private universities, without access to the public largess, administrative and instructional positions increased at about the same rate.
HT: Chris Douglas
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