I agree with the points in your analysis, but putting your example in a competitive marketplace should cause prices to reduce to the marginal costs. Perhaps so

I agree with the points in your analysis, but putting your example in a competitive marketplace should cause prices to reduce to the marginal costs. Perhaps some of the local colleges can provide at that price, but we've created a system that values name-brand education, and the artificial scarcity at the top (partly, to protect brand identity) mitigates some of the downward price pressure. Even still, if marginal costs are a fraction of tuition (and I believe they are, often) why are tuition rates increasing so rapidly?