Here are four reasons why colleges cost so much and why it is difficult to lower tuition prices.
- You might recall David Reisman’s fifty-year old rule that colleges usually increase revenue to the level of their expenses. In other words, it has been easier to increase expenses and support the needs of the college than to limit expense increases and hold tuition prices steady.
- Because there are so many colleges, especially small colleges, there is little, if any, economy of scale to spread the costs of operation.
- There is little incentive to merge colleges because unlike a business no one a college gains a monetary benefit from a merger. In business, a benefit generally takes the form of a large cash payment to the chief executive.
- Accreditors and government agencies make it difficult to merge colleges or sell one college to another unless the one of the colleges is in dire financial distress. Under that condition, the college in distress has little of value such as a large enrollment base to offer another college.