What’s the Most College Should Cost?

In last week’s newsletter, I discussed some of the $10,000 BA programs that emerged after Texas Governor Rick Perry challenged the state’s college systems to come up with options that would allow students to graduate with a degree at that price point.

As I noted then, this $10,000 degree concept is not about taking an educational program that costs $100,000 to deliver with students paying just a tenth that number (the rest being covered by grants, scholarships and institutional subsidies). Rather, the challenge was to see if something that can reasonably be called a college education can be provided to a student for just $2500 per annum.

Some of the experiments that emerged in Texas involved shuffling around when students start earning credit towards a college degree. For instance, Texas A&M accepts “dual-credit” courses taken in high school that can cover up to half the credits needed to earn a BA. Another mechanism for reaching the $10K price point involved using excess capacity at an under-enrolled state university to let some students enroll in a program with a $2500-per-year price cap (vs. the $6,300 paid by traditional at that same school).

If such programs continue, it will be interesting to see if a six-year High-School/BA program (which is pretty much what the A&M experiment entails) ends up generating students who seem like they’ve been through a four-year BA or two-year Associate’s degree program. And I’d also be curious to see how those students paying $6300 per year for college appreciate sitting next to a group allegedly getting the same education for less than half that price.

Ten-grand degree programs in Florida seem to be blurring the line between post-secondary school and workforce development to help students obtain job-related credentials that travel under the name of a college diploma. But given the cost of anything these days, I can’t imagine a scaled version of any of these programs would be able to deliver something of quality without subsidies making up the difference between the $2500 a student pays and the cost of providing them a reasonable level of learning.

But if $2500 a year seems too little to cover the cost of a year at a college or university, $50-60,000 per year (the cost of a year’s tuition and fees at most prestige schools) certainly seems like too much – especially to we parents who need to pay that for four years running for each kid we brought into the world.

Now one could debate if my Degree of Freedom project demonstrated that a BA worth of learning can be had for nothing, or point out that the work I put into it didn’t leave me with any sort of marketable credential (even if I’ve gotten more professional mileage out of my One Year MOOC BA than I ever did from my four-year residential one). But rather than obsess over the lowest possible cost for gaining either the experience or documentation associated with completing college, perhaps we should look at what a reasonable top threshold for a year of college should be.

A number of people asked how I performed the calculation (based on numbers in this article) that ended the newsletter, a calculation that came up with a maximum reasonable cost for a year of college of $15,000. Basically, I just looked at the inflation associated with buying a home (which used to cost 220% of an average US annual income and now costs 370%) and applied that inflationary factor (370%/220% = 1.68) to the cost of college in 1950 (also expressed as a percentage of average US income).

So if college used to cost 18% of the average US income and if the price of college had risen as fast as did housing, then today college should cost 18% x 1.68, or 30% of annual income. And with annual income today in the $50K range, 30% of that brings you to $15,000 per year (or $60,000 total for a four-year degree).

As anyone writing checks to a prestige school knows, however, annual prices are running more than three times that figure. And the difference between what students and parents actually pay and the $15,000 they would pay if the inflation rate associated with housing and college stayed the same is the reason why we are having so many debates over the ludicrous price tags associated with earning a college degree.

Now all the calculations I’ve done were based on prices associated with one prestige school from the original analysis linked above (the University of Pennsylvania). And it’s generally not a great idea to read too much reality into calculations based on averages. But thinking through everything my kids could do with $15,000 a year to play with as MOOCs and other free learning resources become increasingly available and increasingly better, it strikes me that $60,000 ($15,000 a year for four years) should be the most anyone should shell out to obtain the very best quality education.

Is such a thing possible? Tune into the next few Monday cost-of-college blog entries as we explore that matter further.