Comments on: Why are professional schools so expensive?

Question: Why are professional schools so expensive?

Paul KC — Thu, 14 Feb 2008 08:13:03 -0800

Why are professional schools like medical and dental school so expensive? Do they charge so much because they can or do they charge so much because they must?

By: jtfowl0

jtfowl0 — Thu, 14 Feb 2008 08:27:48 -0800

Both.

Med and dental schools have higher costs than other grad programs: faculty salaries are more expensive (since they have to offer comparable salaries as the private sector in order to get good professors), equipment is more expensive, and students are really resource-intensive. So schools charge higher tuitions to offset these higher costs. Costs are so different for medical schools that most studies of tuition analyze these types of programs separately.

However, the monetary returns to education for doctors is so high that medical and dental schools (and law schools and MBA programs), unlike other graduate programs, don't offer much in terms of institutional financial aid to students because the payoff is still sufficiently high to justify the high tuition. Even with the high costs, medical schools generate a lot of money for institutions, especially once you consider the cash (including research grants and Medicaid payments from the federal government) generated by medical schools.

Could institutions afford to reduce tuitions and still get by? Probably, but disentangling the costs of higher education is so tricky that institutions can get away with not doing so.

By: The Giant Squid

The Giant Squid — Thu, 14 Feb 2008 08:27:58 -0800

Medical schools have to maintain lots and lots of equipment. On the other hand, Business Schools and Law Schools rarely do (books and projectors).

So, why do they cost the same?

1. At some Universities B-School and Law School subsidize other graduate education.
2. Med School/Dental School is expensive because of cost of equipment, B-School/Law School is expensive to attach 'prestige' to the degree program.

For instance, if a law school does not maintain consistently high salaries for its staff, it's in danger of losing its ABA accreditation (I'm not kidding).

By: gjc

gjc — Thu, 14 Feb 2008 08:28:00 -0800

Both. It costs a lot to run a school like that. Schools that have huge endowments charge it because they can. Schools that don't charge it because they have to.

By: Good Brain

Good Brain — Thu, 14 Feb 2008 08:44:49 -0800

It also helps to think of these professions as guilds. The existing memebers have incentive to constrain supply.

By: Nelsormensch

Nelsormensch — Thu, 14 Feb 2008 08:48:41 -0800

Both is definitely the correct answer. It's arguably good that they charge as much as they can and do because this:

At some Universities B-School and Law School subsidize other graduate education.

is very true. Graduate studies in say, philosophy or art history, don't really pay for themselves. {Medical,B-,Law} School plus engineering-esque departments make some of the less profitable programs possible.

By: a robot made out of meat

a robot made out of meat — Thu, 14 Feb 2008 09:11:55 -0800

My med school charges about $41k/year and loses money (it's subsidized by the hospital). That's mostly operating costs; there's probably distortion by virtue of building- and capital- donations for the med school going to the hospital that owns it.

By: aswego

aswego — Thu, 14 Feb 2008 10:11:32 -0800

I can't believe nobody's mentioned insurance costs, which must be ridiculously high for medical and dental schools. Throw in the fact that they just don't open new medical schools anymore, and you can see why that's so high. With law schools it's more that they simply can get away with it.

By: TedW

TedW — Thu, 14 Feb 2008 10:45:09 -0800

...they just don't open new medical schools anymore...

That's not entirely true.

Also, as this table shows, there are some schools (and the Uniformed Services School of Health Sciences which charge no tuition and a few more that charge less than 10,000/yr. Not really cheap, but considering the earning power of an MD degree, 7-8k$/yr. is not too bad.

By: mintchip

mintchip — Thu, 14 Feb 2008 17:28:13 -0800

Well, I am not sure of the answer to your question but I will say that I've noticed that many professional schools seem to charge approximately your estimated earning power for your first two years out of school. So for example, many young American doctors will owe approximately $300,000-350,000 coming out of school, which is about equal to (plus or minus) two years of salary.

Similarly, a Master's in Journalism might cost you around $80,000 (including living expenses, which are normally factored in to "cost of education" estimates). Approximately two years of income at your first job out of school.

So it does seem to me that the cost of education is tied, in part, to what the market (ie. students) can bear rather than simply what it costs the school to offer it.

I do realize, of course, that there are variations in program length (med school = 4+ years while a Master's program is usually two).

By: mintchip

mintchip — Thu, 14 Feb 2008 17:32:56 -0800

Also, I think there isn't much incentive for them to lower costs as people will continue applying. Not only do people apply, but the school gets to reject a large percentage of them. Now, if the school HAD to lower costs in order to have a full incoming class, that would be an entirely different situation. I bet you'd see prices drop real fast.

By: 26.2

26.2 — Mon, 18 Feb 2008 18:18:07 -0800

Another factor is economies of scale - generally, the programs have a fairly small number of students and high fixed costs.

There's that, and then there's also the "because they can". I just looked at what my B-school is currently charging for an MBA...yowza.