Skip to comments.College Education: Another bubble ready to burst!
Posted on 04/19/2011 8:55:52 AM PDT by SeekAndFind
Senator Bernie Sanders added a new victim to the long list in his most recent column -- college students. Sanders complained that the Republican budget proposal would reduce the average Pell higher education grant by 17 percent at a time when the cost of a college education is "soaring."
Having just sent the last of my three children off to college, I cannot argue with Sanders description of college tuition costs -- they are, indeed, soaring. Statistics confirm personal observation as, according to the Measuring Up 2008 report by the National Center for Public Policy and Higher Education, tuition and fees for U.S. colleges and universities increased by 439 percent between 1982 and 2007.
Over this same period, median family income rose only 147 percent. In fact, a line graph showing increases in medical, housing and education costs in comparison to the Consumer Price Index has education on top, far and away.
Maintaining the current level of higher education funding, or worse, raising it, does nothing to address the issue of why college costs are rising so much faster than others. In fact, it may be ignoring one of the biggest factors in increasing costs. Much of the upward pressures on college costs can be traced directly to government involvement in education financing. Colleges charge more because the government makes sure the money will be paid.
Aid to college students has increased at well above the rate of inflation over the past few decades. In 1990 the federal government provided $19 billion in grants and loan guarantees. By 2000 that number had climbed to $63 billion. The 2009 federal budget included more than $129 billion in federal assistant to college students, and President Obamas 2012 budget raises that amount to nearly 167 billion, a $38 billion or 29 percent increase in three years.
It is not unreasonable to observe that once a third party takes partial responsibility for costs, both consumers and providers become a lot more careless about how that money is used.
There are a number of games being played by our colleges and universities to justify rising costs. One is to send out a gazillion brochures to every high school kid whos even sneezed in the direction of the SAT so as to attract as many applicants as possible. Since there are only so many openings, the school then gets to reject a whole lot of those applicants (and still keep their $50 to $80 application fees) and appear more "exclusive."
The more exclusive they appear, the more they can charge for their services. The current crop of students and their parents have accepted this unquestioningly and have shown a willingness to pay, with help from Uncle Sam, top dollar for what they believe will be a superior education.
Meanwhile, college costs show no sign of moderating and more young people are starting their working lives saddled with significant amounts of debt, only some of which is federally subsidized.
"Cheap" loans lure many young people into higher education despite their lack of serious interest in academic pursuits. That many students are attending college for the wrong reasons is borne out by some disappointing findings: Six-year graduation rates for bachelors students is only about 56 percent; college students devote 3.2 hours to education on an average weekday, versus 3.9 hours to "leisure and sports;" and almost half of full-time college students binge drink or abuse drugs, with the incidence of such behaviors rising.
Since these young people still have to repay their loans, whether or not they actually benefit from their time spent in college or complete their degrees, should warrant more caution on the parts of parents, students and institutions.
There are a few colleges that have not joined this circle of folly, and these exceptions help prove the rule. One of them is Grove City College, a small, private liberal arts college in western Pennsylvania. GCC does not accept any money tied to federal funding, including Pell Grants, federally guaranteed student loans and even scholarships. GCC prides itself on being academically rigorous as well as affordable.
For the 2010-11 school year GCC charged students about $21,000 for tuition, room and board. Compare this to the average private college costs of slightly more than $37,000 for the same academic fiscal year. Somehow Grove City is able to provide a quality education without the federal dollar infusion and does it at almost half the average cost.
Government-guaranteed loans and grants distort the true cost of education. If parents and students start refusing to take on excessive debt in order to pay the hyper-inflated tuition rates being fueled by third-party involvement in education financing, we should soon see a downward shift in higher education costs. Wiser consumers could provide the good, sharp pin of which the higher education bubble is in dire need.
-- Audrey Pietrucha helps coordinate the Vermont Liberty Alliance
Gee, government interference in the market place dislocates stuff— just like in housing.
The cost of higher education is going up and up and up because they can dip into federal funds. There’s no basic reason that costs should be so high.
It is a bubble that has been LONG overdue for some SERIOUS bursting.
>>...at a time when the cost of a college education is “soaring.” <<
The author forgot to add, “and the value of a college education is plummeting.”
My youngest daughter is doing her post graduate engineering work now. She is deferring her graduation until next fall because she is in a relatively well paying internship and loses that job once she graduates. Even though her grades are stellar, and she beet out 4,000 candidates for the job she currently does in this internship, there is no work for her out there. And engineering is one of the few places that a college education is a MUST. Brain surgery would be another.
Businesses have been wising up to the MBA for a long time now as well. I have no doubt the higher education bubble is about to collapse. It is not about if. It is about when.
I wonder how he thinks they could do this. Not attend college? Not attend top ranked colleges? The parents and students are squeezed in the middle with nowhere to go.
You are so right! I went to college when we could work and afford the tuition without our parents having to remortgage our home. I remember the days when you could afford to go to a doctor and/or dentist without having medical/dental either. I know we can never go back, but perhaps the concepts would serve us well for decisions going forward.
Why should State Universities exist when a good number of students leave the state immediately after graduation. What benefit does the state get for their money?
I think we are just awakening to the tip of the iceberg.
It’s a perfect storm. The college gets the money and the student is saddled with the debt. Many diploma mills are registering homeless people. They talk them into completing the FASFA application, take the money and could care less if they ever see the “student” again.
In the late ‘70s when my daughter was 8 or so, I decided that Duke was a good place to send her. So I began to put aside enough to pay for four years at the school, based on what was charge in 1979. By the time she graduated, I had discovered that costs at that school had gone up exponentially, So she went somewhere else. My theory is that when the school saw that the feds would give loans, they made plans to spend it. When the Reagan Administration began to cut back, they had already committed themselves. So they jacked up tuition, fees etc. amd gulled parents with the promise of a relatively cheap Ivy League education. When ther federal money began to come back. they continued to raise the costs, charging what the markey would bear. What happened in health, happend also in education. Too much of a good thing.
RE: I wonder how he thinks they could do this. Not attend college? Not attend top ranked colleges?
If you can get aid from top ranked private colleges and you can afford the difference in tuition, I say go for it.
If you can’t, why worry yourself over it?
There is no rule in life that says you must go to Harvard or Yale to be successful in life.
How about attending STATE COLLEGES and if that does not appeal, considering CONSERVATIVE COLLEGES that do not take Federal government money?
There are quite a few of the latter you know... the article mentions the excellent Grove city College ( ranked in the top 20% in terms of value for money in a survey by Payscale, see here : http://www.payscale.com/education/average-cost-for-college-ROI-2010 ).
Hillsdale College is another one to consider ( Sean Hannity, Rush Limbaugh and Mark Levin have been raving about this college ).
There are many more and I’m sure posters can post their own favorite conservative colleges here.
Anytime a seller of a product or service knows that every person walking in their door AUTOMATICALLY has access through loan or otherwise, a set minimal amount of money available to them, there is no reason whatsoever to ever charge less than that amount of money.
Guaranteed Student loans, Section 8 rental vouchers, etc all create artificial floors on the cost of products or services and any seller of such products or services sees no reason to EVER price their product below that minimum, in fact, given that is the minimum they know everyone has, if they feel they are providing more than the bare minimum they feel naturally obligated to charge above and beyond that floor.
There is no downward pressure on price below that floor.
I'll never understand how smart people who tend to be pretty careful with their money are willing to mortgage their own futures (let alone their kids' futures) by p!ssing away $45,000+ per year on an undergraduate education.
Actually Bill Gates went to college ( Harvard ), he dropped out.
So did Apple’s Steve Jobs.
BTW, Abraham Lincoln never went to college.
It is no surprise that liberals disproportionally populate college faculties.
Instead of someone standing up and saying that the cost of college education is inflated far beyond all reasonable value, we have to simply increase the amount of taxpayer dollars allocated towards subsidizing faculty payrolls.
I may have missed it, but I will be dollars to doughnuts that the phrase “for the children/students” is in there somewhere.
My son and I are going to a reception tonight for students who have just been admitted to Notre Dame. It's #9 on the list of best value for the money : )..... but it still costs $182,0000 for four years. : (
I joined the military, got the GI Bill, and went to a State College when I got out. I commuted to school, lived at home with my parents who were more than happy to waive rent as long as I was going to school, and graduated with a degree and no debt.
No way my parents would have been able to send me to Harvard even if I had wanted to go, and I wasn’t going to strap them with that.
It is related to living within your means, and spending 250-500K on a college education isn’t living within your means for most people.