From the News You Can Use Archives 02/20/07

The Economics of the Super Bowl and Higher Education Compared
By Ian Crawford, Web Communications Editor

Higher education is like professional sports.

Or so says a recent article seeking to explain the rapid rise in the cost of a college education. The article Why Does College Cost So Much? on the Web site ConsumerAffairs.com looks at why so many students today cannot afford the expense of getting a degree and many others can only do so by taking on huge debts.

With memories of Super Bowl XLI still fresh in our minds, the article asks us to compare professional football -- think magnificent Dolphins Stadium, an asking price of $600 and up for a ticket to see millionaires chase a pig skin around in the rain, not to mention the expense of those ads in the breaks -- to higher education institutions today.

The article points out that professional football teams have not always played in such a rarified atmosphere. Forty years ago, they played in baseball stadiums and it cost very little for fans to attend games. What changed?

Joel Naroff, chief economist at Naroff Economic Advisors, a private forecasting firm, argues that both professional sports and institutions of higher education came to similar conclusions about their business models. "Basically, if you can pass on your costs, you don't care what your costs are," Naroff said. Elite schools have found that rapidly increasing the cost of attendance actually made them appear more desirable to potential applicants. This, in turn, led to a spending race between institutions. And as long as there are plenty of qualified applicants, this race is not going to end.

Naroff mentions some of the factors driving this competition:

• The perception that the more expensive a university is the more desirable are its degrees means there is little pressure to keep costs down.
• Universities are spending a lot more on bidding for well-qualified faculty. As a result, salaries and perks for professors have risen dramatically.
• A great deal more money is being spent on facilities (new dorms, athletic facilities, restaurants, etc.) to attract the best students.

While colleges are a lot more luxurious nowadays, it costs students a lot more to attend. And it doesn't look like competition for customers — whether in higher education or in professional sports — is going to drive prices down.

Why Does College Cost So Much? — ConsumerAffairs.Com

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Story posted February 20, 2007.

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