Itemizing the Cost of College

In case you’re wondering what my Monday musings on the cost of college have to do with MOOCs and free learning, while I realized quite early that pre-backlash fantasies of MOOCs replacing traditional residential college programs were not realistic, this does not eliminate the possibility that new free learning tools might one day provide an alternative for a portion of students (perhaps a sizable portion) trying to obtain the equivalent of a college experience in the future.

One of the reasons critics of the current higher education system got so excited about MOOCs in the first place was that they seemed to provide an option for students and parents looking at huge and growing tuition bills paid to colleges that they felt were charging more while delivering less.

So a hard look at what one actually “buys” when one pays for a college education seems like a good starting point to see if new Internet-driven options might eventually provide decent alternatives for some or all of these components.

Picking the school at the top of the US News and World Report rankings (Princeton) as our example, tuition and fees for the 2013-2014 academic year came to $40,170 and room and board $13,080 for a total price tag of $53,250. This places Princeton’s tuition right around the average for a non-profit private school (actually a little less) and a look at how this list price subsidizes down to a net price can be seen in this infographic.

I’m going to pull room and board out of the equation for now since a student needs to live somewhere (as well as eat) whether they reside on campus, off campus or commute from their parent’s home. And while I’m sure one can get those costs down to under $13K per year by sharing a squalid apartment with a dozen fellow students and eating ramen five times a week, my guess is you’re still looking at a low five figures price tag to live anywhere for most of a year. Even living at home has costs attached to it (albeit costs your parents are already covering as part of their own living expenses). So for now, let’s just look at the $40K tuition bill and see how it can be broken down.

I’ve already noted that the cost of taking courses comparable to what one would get at a decent liberal arts college probably falls into the $10-$15,000 per year range, tops. A liberal arts degree at Harvard Extension (a school that only delivers courses – no dorms, no sports teams, no clubs or cafeteria), for example, can be had for that $10K figure.

In theory, my One Year MOOC BA demonstrated that the cost of these courses could be nothing. But I’m hesitant to claim that this experience gave me everything I would have gotten had I taken full-semester courses in those same subjects in a physical classroom with a reasonable number of fellow students sitting beside me.

That said, I do think if I had spread my online learning experience over four years and had $10-12,000 to spend each year on things like tutors, paper-graders and independent study programs (that would provide access to various learning communities), my overall educational experience would rival or exceed what you would get from four years at Princeton. So for purposes of this discussion, I’m going to assign $12,500 of Princeton’s $40,000 tuition bill to the cost of courses.

This leaves $27,500 of the annual tuition bill (more than twice my assigned cost of courses) unaccounted for.  Which means that by the time you finish four years at that school, more than $100,000 was used to pay for something that can’t be found in the classroom.

A candidate for one of these line items includes the liminal experience of participating in a right-of-passage journey at the right time in life with fellow students engaging in comparable experiences.

The value of this component of college came home to me when a kid in my neighborhood (a recent college grad) talked about what he liked most about his high school experience: the exposure it gave him to bright people with backgrounds and interests different than his own. That got me thinking back to my own college years when I lived on a hall with people from Colorado, California, Indiana, Germany and other strange and exotic places I had not been exposed to during my parochial New England upbringing. In addition to learning about the world through these non-academic relationships, exposure to the intense learning environment that was college (at least in the ’80s) no doubt gave me the learning and studying chops to do what I did last year.

Finally, you’ve got the discrimination premium I talked about in the most recent Degree of Freedom newsletter. This is the value a college degree (particularly one from a well-known college or university) gives a graduate when they enter the job market. And while I’m sure the contacts one makes in college can also be leveraged throughout life when looking for work, in this age of online professional networking I suspect that the major employment boost one gets by “buying” a degree is the employment premium derived from having the name of a well-known college appear at the bottom of a resume.

How to divide that $27,500 per year (or a rounded $100,000 total for four years) between liminality and discrimination premiums is not so obvious. In theory, the differential between attending a fancy not-for-profit school (average cost of ~$42,000 per year) and a public university (average ~$21,000) could all be assigned to discrimination. But remember that public university costs are subsidized (meaning the actual costs are more than that $21K), and for many jobs just having a BA is good enough to get through the door of an employer. So for purposes of this discussion, I think dividing the non-course portion of the tuition bill 50:50 is a safe way to go.

In which case, the $53,250 invoice that students and parents paid to Princeton last year can be itemized as follows:

• Courses: $12,500
• Room and Board: $13,080
• Liminal Experience Expense: $13,835
• Discrimination Premium: $13,835

Now you won’t find this breakdown on any bill or brochure coming from Princeton or any other college or university. But if you accept the premises I laid out that led to this particular itemization, the next step in this analysis would be to determine whether or not an education based on something other than a traditional college experience can give you these same benefits (or more) for fewer dollars.