What WSJ Gets Wrong On The Cause Of Higher College Costs

Wall Street Journal editorial and a Fox News show of Journal editorial members ignored a major contributor to rising college costs -- state budget cuts to higher education -- while falsely blaming federal financial aid for the cost increase.

President Obama Says State Budget Cuts And Universities' Lack Of Cost Controls Contribute To Higher College Costs

Obama: “States Have Been Cutting Back On Their Higher Education Budgets” And “This Sticks It To Students.” From President Obama's August 22 speech on college affordability in Buffalo, New York:

THE PRESIDENT: But what I want to talk about today is what's become a barrier and a burden for too many American families -- and that is the soaring cost of higher education. (Applause.)

This is something that everybody knows you need -- a college education. On the other hand, college has never been more expensive. Over the past three decades, the average tuition at a public four-year college has gone up by more than 250 percent -- 250 percent. Now, a typical family's income has only gone up 16 percent.  So think about that -- tuition has gone up 250 percent; income gone up 16 percent. That's a big gap.

Now, it's true that a lot of universities have tried to provide financial aid and work-study programs. And so not every student -- in fact, most students are probably not paying the sticker price of tuition. We understand that. But what we also understand is that if it's going up 250 [percent] and your incomes are only going up 16 [percent], at some point, families are having to make up some of the difference, or students are having to make up some of the difference with debt.

And meanwhile, over the past few years, states have been cutting back on their higher education budgets.  New York has done better than a lot of states, but the fact is that we've been spending more money on prisons, less money on college. (Applause.) And meanwhile, not enough colleges have been working to figure out how do we control costs, how do we cut back on costs. So all this sticks it to students, sticks it to families, but also, taxpayers end up paying a bigger price. [The White House, Office of the Press Secretary, 8/22/13]

WSJ, Fox Ignore State Budget Cuts, Blame Federal Financial Aid For Increased College Costs

WSJ Editorial: “Obama Is Attacking Colleges For Rationally Raising Tuitions ... In Response To a Subsidy Machine.” An August 23 Wall Street Journal editorial claimed that President Obama “specifically blamed colleges and universities for charging too much,” while ignoring the president's mention of state budget cuts contributing to higher college prices. The editorial also blamed federal financial aid to students for increasing public tuition costs:

Mr. Obama is trodding a well-worn political path. Politicians subsidize the purchase of a good or service, prices inevitably rise in response to this pumped-up demand, and then the pols blame the provider of the good or service for responding to the incentives the politicians created. Think housing finance and medical care. Now President Obama is attacking colleges for rationally raising tuitions and padding their payrolls in response to a subsidy machine that began in 1965.

That's when the feds launched a program to make college “affordable” by offering a taxpayer guarantee on student loans. Federal grants and loans have been expanding ever since and it's no coincidence that tuition prices have been rising faster than inflation for decades. This week the White House noted that since the academic year ending in 1983 tuition and fees at four-year public colleges have risen by 257%, while typical family incomes have advanced 16%.

The better answer is to stop the increases in grants and subsidized loans that Mr. Obama has so greatly accelerated. [The Wall Street Journal8/23/13]

Fox's Journal Editorial Report: Federal Aid Led To College Cost Increases. On Fox News' Journal Editorial Report, WSJ assistant editorial page editor Jason Freeman said it was “basic economics” that college prices were rising after “the government subsidize[d] college education.” Without mentioning state budget cuts to higher education, OpinionJournal.com assistant editor Allysia Finley explained the problem as: “The government keeps on pouring more money into higher ed, keeps on pouring in subsides, the colleges are pocketing the money, raising the costs. I mean, is this really unexpected?” [Fox News, Journal Editorial Report, 8/24/13]

States Have Cut Higher Education Funding For Years While Enrollment And Tuition At Public Institutions Have Increased

Three-Quarters Of College Students Are Enrolled In Public Colleges And Universities. The Department of Education's “The Condition of Education 2012” report shows that as recently as 2010, nearly 76 percent of undergraduate students that were enrolled in colleges or universities go to public institutions. [U.S. Department of Education, National Center for Education Statistics, May 2012]

CBPP: As State Funding For College Has Been Cut, Public College Enrollment Has Grown. In a March 19 report on how state budget cuts have harmed higher education, the Center on Budget and Policy Priorities (CBPP) included the following table showing how state funding for higher education has declined, enrollment has continued to grow:

CBPP Table

[Center on Budget and Policy Priorities, 3/19/13]

CBPP: “State Cuts To Higher Education Funding Have Been Severe And Almost Universal.” In its March 19 report, the CBPP highlighted how severe recent cuts in state funding for higher education have been over the last five years:

As states prepare their budgets for the coming year, they face the challenge of reinvesting in public higher education systems after years of damaging cuts -- the product of both the economic downturn and states' reluctance to raise additional revenues. In the past five years, state cuts to higher education funding have been severe and almost universal. 

The report also explained that "[t]uition increases have been both substantial and widespread," using the following graphics to show how much average tuition has increased per student at public four-year colleges over the last five years:

Tuition Increases

Public College Tuition Has Increased Mainly Due To State Budget Cuts

NY Fed Economists: Analysis Suggests Public Universities Increasing Tuition To Make Up For State And Local Government Budget Cuts. In an article on the Federal Reserve Bank of New York's website, three Federal Reserve economists and analysts explained:

In the public discourse, federal funding is often blamed for driving up tuition. However, our analysis suggests that public schools are increasing tuition as a way to make up for decreasing state and local appropriations for higher education, and that deeper cuts in public funding may be associated with correspondingly greater tuition hikes.


State and local appropriations for public universities and colleges have been declining since 2000, while net tuition at public schools has grown substantially both in real terms and relative to private tuition growth. Our post presents strong suggestive evidence that decreases in state and local appropriations are associated with increases in net tuition at public schools, particularly in recent years. [Federal Reserve Bank of New York, Liberty Street Economics, 9/19/12]

CBPP: Public Universities “Have Increased Tuition To Compensate For Declining State Funding.” From the CBPP's March 19 report on how state budget cuts have harmed higher education:

Deep state funding cuts have major implications for public colleges and universities. States (and to a lesser extent localities) provide 53 percent of the revenue that can be used to support instruction at these schools. When this funding is cut, colleges and universities generally must either cut spending, raise tuition to cover the gap, or both.

That's what has happened since the recession hit.


Public colleges and universities across the country have increased tuition to help make up for lost state revenue. As a result, the average cost of attending a public college or university -- particularly a four-year institution -- has surged in recent years.

Average annual published tuition at four-year public colleges -- the “sticker price” -- has grown by $1,850, or 27 percent, in real terms between the 2007-08 school year, the year just prior to the recession, and the current 2012-13 school year.


Significant boosts in federal student aid and in the value of federal tax credits have reduced the impact of these tuition hikes on students and their families, but only partially so. [Center on Budget and Policy Priorities, 3/19/13]

American Association Of State Colleges And Universities: “Significant State Higher Education Funding Cuts ... Resulted In Equally Significant Increases In Tuition.” From a June 19 USA Today report on several states promising to spend more on higher education:

For students and public universities alike, “things are more optimistic-looking in the next 12 months compared with the last half-decade,” says Daniel Hurley, spokesman for the American Association of State Colleges and Universities.

“As recently as two years ago, we witnessed significant state higher education funding reductions, which resulted in equally significant increases in tuition prices. This year the evidence suggests that the funding turbulence has settled down considerably,” Hurley says. “Most states have provided modest funding increases and as a consequence, the rise in tuition prices at public universities will likely be lower than what we've seen during the past decade, with tuition price freezes even being put in place in a number of states.” [USA Today6/19/13]

NY Times: “Public Divestment” In Higher Education “Is Primarily Responsible For Skyrocketing Tuitions At State Institutions.” From a March 1, 2012, New York Times article on increasing college costs:

As state funding has dwindled, public colleges have raised tuition and are now resorting to even more desperate measures -- cutting training for jobs the economy needs most.


This squeeze is one result of the states' 25-year withdrawal from higher education. During and immediately after the last few recessions, states slashed financing for colleges. Then when the economy recovered, most states never fully restored the money that had been cut. The recent recession has amplified the problem.

“There has been a shift from the belief that we as a nation benefit from higher education, to a belief that it's the people receiving the education who primarily benefit and so they should foot the bill,” said Ronald G. Ehrenberg, the director of the Cornell Higher Education Research Institute and a trustee of the State University of New York system.

Even large tuition increases have not fully offset state cuts, since many state legislatures cap how much colleges can charge for each course. So classes get bigger, tenured faculty members are replaced with adjuncts and technical courses are sacrificed.

State appropriations for colleges fell by 7.6 percent in 2011-12, the largest annual decline in at least five decades, according to a report from the Center for the Study of Education Policy at Illinois State University. In one extreme example, Arizona has slashed its college budget by 31 percent since the recession began in 2007.

It is this cumulative public divestment -- and not extravagances like climbing walls or recreational centers advertised on a few elite campuses -- that is primarily responsible for skyrocketing tuitions at state institutions, which enroll three out of every four college students. [The New York Times3/1/12]

To learn about the lack of evidence for the claim that federal student aid such as Pell Grants and loans increase college tuition, click here and here.