Is College A Waste Of Money?

For those who graduate, higher earnings and productivity are a sure thing. But one researcher makes the case that much of the money being paid to colleges and universities isn't really creating any return

“The law of unintended consequences looms large in any discussion of America’s colleges and universities.” - Richard Vedder

As politicians climb over each other to advocate investing more and more dollars in America’s education system, one voice out there says we’re already investing far too much in our colleges.

Ohio University economics professor Richard Vedder, who is also director of the Center for College Affordability and Productivity, has released a new report that attacks some sacred cows on the education front.

More Money, But Not More Grads
Vedder offers a raft of examples of states that have boosted their funding of higher education year after year, only to see their economic growth fall rather than rise over the long haul. Although there’s no doubt, he says, that college graduates make more money in their lives and are more productive than non-grads, that doesn’t mean that huge outlays being made for higher education are creating tangible benefits for anyone.

For starters, giving more money to colleges doesn’t result in more people graduating with diplomas. Although the proportion of college grads in the U.S. adult population is going up, it’s rising much slower than it is in other countries around the world. Part of the problem is that schools gain more prestige by denying admission to more and more students, not by opening their doors wider. As a result, only about one thirty cents of every dollar in new state appropriations actually gets through to the point of reducing student tuition costs.

Another problem is that, in a world where almost all colleges want successful sports teams and a vast array of services for students, an increasing proportion of tuition and state grants to schools is going to administrative costs and not directly to education.

World's Most Expensive Filter
Perhaps most interesting, however, is Vedder’s suggestion that American colleges have simply become an outrageously expensive “filtering” system for employers. Companies once did extensive testing of applicants before hiring them. But that ended with the Griggs vs. Duke power decision of the Supreme Court in 1971, which outlawed most employer testing of job applicants. After this decision, Vedder says, the wage differentials between high school and college grads took off. Companies had to rely on a college diploma as a sign that an applicant had basic writing and organizational skills, and was capable of co-existing with others. Colleges were able to raise tuitions drastically as a result.

Vedder recommends boosting the incentives for colleges to reduce costs rather than simply feeding them more money. That could include cutting expensive programs that don’t attract many students, pricing various degree programs differently, depending on their value to students, making tenure a benefit professors can buy more like health coverage, and using college buildings, many of which are empty much of the time, in a far more efficient way – possibly even having them run by real estate managers rather than by the schools themselves.

Vedder’s report can be read in full here.