As admission rates have dropped, the cost of attendance has increased‚Äîa correlation seen at many highly selective schools. By 2025, the University of Chicago‚s sticker price is predicted to pass the $100,000 mark, which would make it the first U.S. college where attendance costs six figures, according to a new analysis by The Hechinger Report, an education-news outlet.
The analysis suggests at least a handful of other U.S. colleges will follow suit soon after Chicago hits that milestone, including California‚s Harvey Mudd College, New York City‚s Columbia University, and Texas‚s Southern Methodist University.
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Sticker price (college) or charge (healthcare) inflates the perception of value and creates an artificial demand for third-payor payors - which consequently leads to student loans and medical debt.
Outcomes Are Measured Without Cost In Mind
Which one sounds better: making $100K with a $250K debt or making $65K with a $40K debt? (Hint: to pay off the debt in 10 years, the first guy has to give up 30% of his salary vs. 7% for the latter)
Because students rely on loans and patients rely on insurance, cost-adjusted outcomes are rarely measured.
Extremely Tilted Leverage Power Toward Providers
Both the university and health system are multi-billion dollar institutions with tremendous power to tip the scale when it comes to lawsuits and basic negotiation.
Individual patients, having zero leverage, tend to be at a disadvantage by default. Payors and federal loan agencies, though powerful, can't intervene before the purchase decision is made.
Would a university student loan program help?
While it sounds like a great idea, I would argue that that would drive the demand for consumerism in education the other way around. To address #collegetuition, we should address how pricing is set and take cost out of the system instead of introducing another layer of black-box economics.
Here are my three recommendations:
- Students should work with not only an academic advisor but also a financial advisor to better understand the consequence of college choices while in high school.
- Outcomes data at public and private universities should be made easily accessible by potential students and be governed with great oversight for accuracy.
- There should be policies to discourage recruiting practices leaning toward "targeted schools" - which concentrates demand in a few prominent private institutions instead of spreading the chances equally to as-good public colleges.