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COLLEGE AND UNIVERSITY EDUCATION: WHY
IS IT SO EXPENSIVE?
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CHAPTER OUTLINE
Why Are the Costs So High?
Why Are College Costs Rising So Fast?
Why Have Textbook Costs Risen So Quickly?
What a College Degree is Worth?
How Do People Pay for College?
Summary
LEARNING OBJECTIVES
LO1: Understand why a college education is so expensive and why those costs have been rising faster than inflation.
LO2: Explain the role of textbooks in those rising costs.
LO3: Apply the principle of present value so as to see why borrowing money to pay for a college education is wise,
if potentially risky, investment in future income potential.
LO4: Understand that the United States has a greater percentage of citizens with a college degree than other
developed countries, though that advantage is rapidly evaporating.
KEY TERMS
Advance- The amount of money paid to authors prior to a book’s publication. This is typically counted against
future royalties.
Royalties- The amount of money paid to authors. Typically paid on a percentage basis.
DISCUSSION QUESTIONS
1. What are the problems associated with the current educational system, where the public school has a monopoly
on K–12 education in the local school district, and teachers are tenured?
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2. Why is a college education so expensive?
3. Talk with the chairperson or head of the economics department or area in your college and find out what percent of
the cost of your college is funded by tuition.
4. Talk with some of your college professors and ask why college professors spend so much less time in the
classroom than high school teachers. Report your findings to the rest of the class.
5. Ask some of your professors if tenure is important to college professors for the same reasons as high school
teachers. Report your findings to the class.
6. What economic concepts are exemplified in the market for college textbooks?
7. How is an author paid?
8. What are the components of the sales price of a textbook? Use your textbook to illustrate.
9. What is the “new edition” scam?
10. How is it that while the Internet has increased the availability of used books, it has also contributed to the increased
cost of new ones?
11. Why does price of a textbook matter to a student, but not to a professor?
12. Why could we say that “the free market is to blame” for the high price of college textbooks?
13. Use what you know about competition and explain why a new edition of a college textbook is published every
three years, or so.
14. On average, what is a college degree worth to a student?
THE WEB-BASED QUESTIONS
Part I.
A number of websites discuss the topic of your chapter, “College and University Education: Why Is It So
Expensive.” Many of these sites are weblogs (blogs). They are mostly elaborations of the material your author
discussed in the text. You can explore some of these issues on the following websites.
www.pcc.edu/resources/tlc/sylvania/documents/20051108-cost-of-textbooks.pdf
www.back2college.com/shock.htm
Briefly summarize the main reasons why text books cost so much.
Part II.
Your author has discussed the issues surrounding the high cost of textbooks. Publishers have had to find
Why College Text Books Cost so Much
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alternative ways of creating textbooks, as well as alternative delivery methods of course material. The following
websites discuss some of them. Visit the sites below and answer the following question:
What will be the form of the college textbook in the future?
www.techlearning.com/shared/printableArticle.jhtml?articleID=20300250
www.planetebook.com/mainpage.asp?webpageid=15&TBToolID=1006
www.lib.rochester.edu/main/newsletter1-4/vol4-classroom.htm
ANSWERS TO STUDY QUESTIONS
SUGGESTED ANSWERS TO THE DISCUSSION QUESTIONS
1.
There are problems associated with the current educational system. Since public schools have a monopoly on K–
12 education in the local school districts, there is no monetary incentive to help a child with a particular need,
and there is no monetary incentive to foster excellence. Although an excellent teacher can make a difference in
student achievement, there is no economic incentive for teachers to improve performance after they are tenured.
Except in cases of abusive behavior, tenured teachers cannot be fired.
2. A college education is so expensive because the costs per student are so much higher in college. College professors
are paid more than the teachers in elementary and secondary schools are paid. It is extremely expensive to maintain
the collection of a college library. The materials necessary for the research of college professors are very
expensive. Some disciplines require almost one-on-one instruction.
3.
The answer can vary. But, the proportion of cost covered by tuition is increasing at most colleges and
universities, as costs rise and state and/or endowment funds decline.
4. Answers can vary, but in general will include: College professors are expected to stay current, if not ahead, of the
new knowledge in their disciplines. College professors teach more advanced topics, and therefore they are
required to have higher degrees and the ability to understand these advanced topics. Many college professors are
expected and even required to produce and publish new knowledge through their research.
5. Tenure for college professors grants them certain job rights (the right to due process before being fired) that allow
them to research and even teach controversial topics. High school teachers rarely do research, and they usually
teach very conventional topics. So, tenure for high school teachers is more about job security than the academic
freedom to research and teach controversial topics.
6. The market for college textbooks exemplifies several economic concepts: fixed and variable costs, the impact of
patents and copyrights on the market for a good, the fuzziness of the line between oligopoly and monopolistic
competition, and the degree to which increased technology increases supply.
7. An author typically gets an advance and royalties. An advance is an amount paid to the author prior to a book’s
publication, typically counted against future royalties. Royalties are the amount of money paid to authors, typically
paid on a percentage basis.
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8. The following describe the components of the sales price of a textbook. Let’s say the final sales price of the
previous edition of your textbook was $80, the book was sold to the bookstore for $60, so $20 represented the
bookstore markup, out of which they took their expenses and profit. The author got 15 percent of the amount the
publisher got, or $9, while the publisher kept the remaining $51. Some of this $51went to fixed costs, such as
payments for supplements, which included the test bank, the instructors’ manual, the website material, the study
guide, the PowerPoints, etc., the share of the editorial staff and marketing staff’s time turning the book into final
form and selling the book, respectively. The variable costs included the cost of the paper, ink, and printing of the
book.
9. Because publishers and authors get paid only when a new book is sold, new editions of books are created every
two to four years. Thus, even a calculus text, a subject that hasn’t changed for several centuries, continues to
appear as a new edition.
10. Technology, particularly the internet, has made it quite easy to sell used textbooks, but this has cut into the sales of
new books by increasing the rate of reuse. Publishers have to raise the new book price and shorten (sometimes
artificially) the publication cycle for new editions in order to make money for themselves and to compensate
authors.
11. Students have no choice in the price of the textbooks that they have to buy because a professor picks the book with
little or no consideration of price, since they are given free texts from which to choose. Price, therefore, matters to
student, but not to professors.
12. The stages of a book from its creation, initial sale, and then resale demonstrate the free market in action, with each
player making a simple economic calculation and acting in his or her own interest. An author decides whether or
not to take the time to write a book based on expectation of compensation. Faculty pick books they think will work
best for their courses and students. Publishers work with authors to publish the most marketable texts. Bookstores
stock what faculty request. Students try to acquire books as cheaply as possible. Book buyers and wholesalers get
into the market to purchase unwanted books. Thus, for all of these reasons, the price of college textbooks is high.
13. After about three years, the number of used textbooks in the market begins to reduce the sales of new versions of
the same textbook. So, authors/publishers make the used textbooks obsolete by writing/publishing a new edition of
the book, often with very few changes.
14. A college education is so expensive because the costs per student are so much higher in college. College professors
are paid more than the teachers in elementary and secondary schools are paid. It is extremely expensive to maintain
the collection of a college library. The materials necessary for the research of college professors are very
expensive. Some disciplines require almost one-on-one instruction.
SUGGESTED ANSWER TO THE WEB-BASED QUESTION
Part I.
The main reasons why textbooks cost so much can be summarized as follows:
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Books cost a lot to publish.
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Professors receive one or more free copies of books that they use in a particular course.
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There is a very large market for used books on the internet.
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Textbooks sold overseas are much cheaper than those sold in the United States.
Why College Text Books Cost so Much
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Publishers and authors are paid only for the initial sale of a book.
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New editions are created every two to four years so that publishers and authors can get the benefit from the
new book revenue and profits.
Part II.
The various authors suggest that new textbooks will be in forms of media different from print. The following are
some of the ideas.
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One potential format is the CD-ROM. It has two the following advantages: it is in color; it can be digitally
searched; and it can be presented with sound and animation. It is also interactive.
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Another form that was experimented in the fall of 2005 was an E-book with expiration dates. Princeton
University, the University of Utah, and eight other colleges were offered a 33 percent discount off, if the
students purchased a digital version of a text, rather than the hard copy.
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GoReader, an e-book company, has developed a handheld wireless device with proprietary user interface.
It has partnered with Harcourt College Publishers, West Group, Addison-Wesley, and Key College
Publishing The e-book company hopes to replace regular textbooks by putting the books on a portable
device that weighs less than five pounds and holds more than 350 textbooks. The device permits
multicolor highlighting, note-taking and bookmarking on a 7.3” by 9.7” color screen, approximately the
size of a traditional textbook. The reader retails for $400 to $500, and each title would by 25 percent less
than the price of a physical textbook.
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Custom publishing is currently being undertaken by systems like SafariU, which permit professors to
select a number of authoritative materials that they combine with their own. The system collates the
materials into PDF, prints, binds, and ships them to the professor or bookstore. In addition, SafariU offers
an online syllabus, with links to PDFs, PowerPoint presentations, and multimedia files. Professors can also
share their materials with each other.
Most of the formats described above are new and in their formative stages. Time will tell how the market will
eventually develop.