With college "costs" (i.e. prices) skyrocketing, the natural question people should be asking is "where does all the money go?" Some of it has gone to offset reduced levels of state funding for public universities. But aggregate per student spending is up over the past ten years. So where's it going? Are professors much better paid than they used to be? Not really, although rising spending on health care benefits does explain part of it. Has there been a radical expansion in the number of faculty? No way, full-time tenure track positions have become scarce in the face of competitiion from lower-paid adjuncts.
An awful lot of money is going to administrative positions:
The number of Purdue administrators has jumped 54 percent in the past decade—almost eight times the growth rate of tenured and tenure-track faculty. “We’re here to deliver a high-quality education at as low a price as possible,” says Robinson. “Why is it that we can’t find any money for more faculty, but there seems to be an almost unlimited budget for administrators?”
Purdue is among the U.S. colleges layering up at the top at a time when budgets are tight, students are amassing record debt, and tuition is skyrocketing. U.S. Department of Education data show that Purdue is typical: At universities nationwide, employment of administrators jumped 60 percent from 1993 to 2009, 10 times the growth rate for tenured faculty. “Administrative bloat is clearly contributing to the overall cost of higher education,” says Jay Greene, an education professor at the University of Arkansas. In a 2010 study, Greene found that from 1993 to 2007, spending on administration rose almost twice as fast as funding for research and teaching at 198 leading U.S. universities.
My only problem with this analysis is that I think it's misleading to say that administrative spending is "contributing to" rising costs. That's not how things work. The issue is that schools are finding that they can get away with charging high prices. Since colleges are non-profits, ability to charge high prices doesn't lead to dividend payouts or the acquisition of big cash stockpiles. The money gets spent. And the trend lately has been to spend it on administrators.
All of which is one reason I'm skeptical that you can really do much on the college "cost" front by offering more tuition subsidies. At any given level of subsidy, schools are going to charge families what they can afford to pay and then they're going to take that money and spend it on the stuff that the people running the school want to spend it on.