Thursday, October 01, 2009

The Higher Education Bubble...

I've argued for a long time that the access to credit has created a bubble in higher education prices (tuition) in much the same way that the housing bubble was created by access to too much debt.

Well, mint.com jumped on the bandwagon today with an excellent post that shows the real cost of college.

The best part of the entire page is the circular logic that inflates the bubble:

1) College costs are rising at twice the rate of inflation

2) So students need to borrow more

3) So the government makes available more loans

4) Making college "seem" cheaper

5) Which allows colleges to raise tuition......

Ahh, the circle of life........

You can see the whole post here.

Cheers!

3 comments:

Anonymous said...

And Banks get to loan even more money to students at exorbitant interest rates and guaranteed repayment by the federal gov't. Talk about a give away to banks.

You can probably tell that I support the Obama administrations attempt to change all this by allowing students to borrow directly from the federal gov't and take the cash cow away from greedy banks. What a scam the student loan business is.

Anonymous said...

The same mechanism is at work in medical costs. Before insurance paid for doctor visits ( circa 1968) fees were relatively low and physicians drove Buicks. Once insurance took away the direct pay part, prices started to rise. There are a whole bunch of professional services which do not follow market functions strictly. When you need them, you use them. Then there is the problem of the professional getting paid.

Ryan said...

Having just gone back to school this fall I have to agree with the rising costs of education. One possible cost savings to consider is that more and more state schools are offering distance education courses and complete degree plans online. This allows students to attend classes online saving quite a bit on costs if they continue living at home or somewhere cheaper further from campus. One downside is this takes away from the traditional college experience. Part of college is interaction that can not be achieved through online learning, however, distance education could prove to be a more affordable option for some.