It took less than five seconds. It's quite literally your third highest submitted post. Before commenting, it seemed appropriate to try and understand your situation a little better as a courtesy.
Assuming that you are honestly asking me for an answer and you're not just in defense rhetorical mode: You are thinking about this incompletely. You aren't buying an index fund directly - if you were, I'd agree with you - you're buying through a much more complicated plan structure that involves the employer having to shoulder the costs of all sorts of fiduciary responsibilities, including, depending upon the servicing contract, paying the custody fees on your husband's account; an account so tiny it's difficult to make profitable (and Vanguard can only do it because of its size). He's not employed by some mid-sized corporation with the scale necessary to get the rock-bottom rates by hiring Vanguard or SSGA, it's a private school for heaven's sake. They have to get the best deal they can and it looks like, all things considered, it was an acceptable one.
In other words, you are looking only at explicit costs and not opportunity costs. If his employer were to go with a better provider, their costs would go up. In this case, you might find yourself in a situation in which they were suddenly matching 50% on 3%, not 4%, to save the school the expenses from the new, lower-cost provider. You'd end up objectively poorer. To save yourself a quarter, you'll cost yourself a dollar. You don't get rich this way.
To put it bluntly: You aren't including all of the relevant variables in your calculation. You're not getting screwed. Your complaint is neither rational nor justified. You're not "losing" $50,000, you're using a bad model to project a future value that can never materialize under your present scenario. It'd be like someone saying, "Oh, man, look how much I could save if I got free room and board like my rich cousin." Everyone is positioned differently. It's not in the cards. If your husband goes to work for a Fortune 500 enterprise, then he can complain about a 0.66% expense ratio on a passive mid-cap index fund. Then there is no justification.
On a final note, 0.50% is an entirely arbitrary rule. Passivity certainly lowers costs but there are other considerations; things like asset class, liquidity, currency exposures. For example, if you had, I don't know, $2 million or something and you wanted to index, you'd most likely pay 0.50% to 0.75% to have an institution run a private, directly-owned index fund for you as the fee differential would pay for itself in terms of tax harvesting and better diversification due to things like being able to equal-weight rather than market-weight the components. It's a significantly superior construction methodology. Yes, you're paying more but you're going to end up richer, which is why rich people do it. Sometimes, special fees need to be assessed, too. You aren't being cheated in all of these cases. For example, the Vanguard Emerging Markets Government Bond Index Admiral Shares charge and expense ratio of 0.33% + there is a 0.75% purchase fee that applies to it. That's perfectly reasonable given the underlying securities in the portfolio.
(I'm hoping this goes through. The last time I started to respond to you, you changed your message and it is now no longer visible.)