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Another overlooked problem is that easy debt financing (not to mention need-based aid) inflates the cost of attending university for those who have to pay full-

Another overlooked problem is that easy debt financing (not to mention need-based aid) inflates the cost of attending university for those who have to pay full-price, including those who borrow the cost. This raises the sticker price required to remain competitive as an institution, and is terribly distorting as the many schools with no or poor endowments compete with wealthier universities for students, professors, and capital.

fragsworth 10y ago
That should only be temporary. Assuming there's competition (and it seems that there is - no university has a monopoly), the influx of money allows the industry to grow. The prices should level out over time.
- zekevermillion 10y ago
  One would think that is true, that tuition is seeking a new equilibrium based on: subsidized lending; lack of bankruptcy protection from student loans; desire of high school grads to enroll in university. However, we do not seem to have reached a tuition plateau yet. Further, the expensive tastes of both public and private institutions, and the leverage undertaken by students, means that this system overall is fragile. If there is a rapid change in economic circumstances, we will find that overlevered students (including those that we thought had "reasonable" debt loads) and high-cost institutions will fail at an alarming rate. Endowments will shrink overnight. States will slash funding for state universities / research. Tuition will not possibly be able to come down fast enough, in those circumstances. Until then -- business as usual!
- unprepare 10y ago
  only if cost is something they compete on. as it is, the most expensive universities are seen as better, more prestigious.
superuser2 10y ago
For better or for worse the social contract in this country is that parents finance their children's education commensurate with their ability to do so. We could lobby Congress to stop considering parents' resources in calculating financial need, but I doubt you will find much sympathy among voters for an agenda of "life is too difficult for children of wealthy families."

fragsworth 10y ago

That should only be temporary. Assuming there's competition (and it seems that there is - no university has a monopoly), the influx of money allows the industry to grow. The prices should level out over time.

zekevermillion 10y ago
One would think that is true, that tuition is seeking a new equilibrium based on: subsidized lending; lack of bankruptcy protection from student loans; desire of high school grads to enroll in university. However, we do not seem to have reached a tuition plateau yet. Further, the expensive tastes of both public and private institutions, and the leverage undertaken by students, means that this system overall is fragile. If there is a rapid change in economic circumstances, we will find that overlevered students (including those that we thought had "reasonable" debt loads) and high-cost institutions will fail at an alarming rate. Endowments will shrink overnight. States will slash funding for state universities / research. Tuition will not possibly be able to come down fast enough, in those circumstances. Until then -- business as usual!
unprepare 10y ago
only if cost is something they compete on. as it is, the most expensive universities are seen as better, more prestigious.

superuser2 10y ago

For better or for worse the social contract in this country is that parents finance their children's education commensurate with their ability to do so. We could lobby Congress to stop considering parents' resources in calculating financial need, but I doubt you will find much sympathy among voters for an agenda of "life is too difficult for children of wealthy families."