The Great Fee Scam

Suppose you went to buy a new car, agreed on a price, and the dealer then announced that there were a number of other fees that had to be paid: a dealer preparation fee, a license procurement fee, and a transportation fee (all of which dealers sometimes charge).  You would probably be a little irritated, but might agree to them.

But suppose he or she then announces there is also a “dealer capital cost fee” (to pay for a new showroom), “a sales representative service fee” (to pay the salesperson’s salary) an “information dissemination fee” (to pay for the dealer’s advertising), and a couple of others as well, adding several thousand dollars to the cost of the car. You probably would leave the dealership in a huff without the car, and, if feisty enough, might call the consumer protection agency, Better Business Bureau,  state attorney general, or some functionary of the Nanny State to complain about deceptive business practices which might then lead to legal action.

Welcome to higher education, the home of lots of new “mandatory fees.” A great higher education reporter, Mary Beth Marklein (USA Today) tells us how prevalent they have become. In Colorado, for example, we learn that between 2006 and 2010, tuition rose 69 percent, but fees rose more than twice as much, 142 percent.  For years, colleges have appeased old jocks, alumni Bubbas, and others by increasingly subsidizing intercollegiate athletics with hidden fees incorporated within some sort of comprehensive student activity fee. The practice of deceptive fees, however, has now reached new levels of absurdity.  Marklein tells us that Indiana University has a steep “temporary repair and maintenance fee,” Southern Illinois University a  “matriculation fee” of $180, etc.

Why are schools doing this? They are being hounded to keep tuition increases low, so they are trying to disguise the rapidly rising cost of higher education by bragging “our tuition fees went up only 3 percent” when, in fact, total mandatory costs rose 5 or 6 percent. While the schools think doing this is clever and a way to assuage public opinion and/or get around legal constraints on fee increases, the reality is parents writing checks know what is coming out of their bank accounts. In fact, this practice makes universities appear to be both greedy and dishonest.

Fortunately, the democratic process works, albeit imperfectly, in our country. Irate legislators are fighting back, and several states have imposed constraints or full disclosure laws. All of this confirms what I have long said: As long as third parties are doing much of the funding, universities will continue to raise prices–by hook or crook–with relative impunity.

As long as incentives to reduce costs and expenditures are almost non-existent, it will not happen. This huge third-party involvement in higher education has not only raised prices in my judgment, but has had several other adverse effects. First, it has significantly reduced academic quality, as an increasing portion of students simply are not equipped for what historically was considered college level work–read Academically Adrift. Second, it has lowered the value of the degree as a signalling device identifying top talent, as manifested in more college graduates getting jobs as bartenders and taxi cab drivers, Third, and the saddest, it has been corrupting, leading universities to engage in all sorts of deceptive practices to feed their money habit that is akin to a craving for drugs by addicts.

Question: would you feel more comfortable buying a used car from a well established car dealer or from a university president? When I started in higher education more than a half of century ago, I would have quickly answered “university president.” Now I am not so sure.

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