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Tuition couldn't skyrocket if students had no means to pay it. The enabler in this situation, is the disconnect between the availability of financing and the p

by roc 13y ago

Tuition couldn't skyrocket if students had no means to pay it. The enabler in this situation, is the disconnect between the availability of financing and the product being financed. You can't get a $60,000 loan for a $20,000 car, but you can absolutely rack up that much (or more) in college debt, for an education indistinguishable from one at a third of the cost. With that kind of distortion in the market, why would anyone be surprised at rising tuition?

mrxd 13y ago
If your explanation were true, we should expect tuition to immediately shift to students when federal loans and grants became available in 1965. But in fact, the data shows that state tuition subsidies for public 4-year colleges have declined slowly, except in the years following recessions when states cut their budgets. These years show much more dramatic declines. This is consistent with my hypothesis that state budget cuts are the primary driver of tuition increases. It's possible that your point still holds, that the availability of federal loans made it easier for states to cut tuition subsidies. But that's a change in the politics of the issue, not a market distortion. Without federal aid, politicians would be more vulnerable to the charge that they're making college less accessible. Federal loans have obviously not created a tuition bubble, for the simple reason that the cost of a public 4-year education (the price charged to states + students) is essentially unchanged over the last 25 years. The story may be different for for-profit colleges. If you want to argue that there's a market distortion there, essentially that for-profit colleges are gouging students and the government, I could easily be persuaded. But since only 10% of students are enrolled in these schools, they're unlikely to be the main source of increasing student debt.
- chongli 13y ago
  This is consistent with my hypothesis that state budget cuts are the primary driver of tuition increases. Two words: administrative bloat!

by roc 13y ago

mrxd 13y ago

If your explanation were true, we should expect tuition to immediately shift to students when federal loans and grants became available in 1965. But in fact, the data shows that state tuition subsidies for public 4-year colleges have declined slowly, except in the years following recessions when states cut their budgets. These years show much more dramatic declines. This is consistent with my hypothesis that state budget cuts are the primary driver of tuition increases. It's possible that your point still holds, that the availability of federal loans made it easier for states to cut tuition subsidies. But that's a change in the politics of the issue, not a market distortion. Without federal aid, politicians would be more vulnerable to the charge that they're making college less accessible. Federal loans have obviously not created a tuition bubble, for the simple reason that the cost of a public 4-year education (the price charged to states + students) is essentially unchanged over the last 25 years. The story may be different for for-profit colleges. If you want to argue that there's a market distortion there, essentially that for-profit colleges are gouging students and the government, I could easily be persuaded. But since only 10% of students are enrolled in these schools, they're unlikely to be the main source of increasing student debt.

chongli 13y ago
This is consistent with my hypothesis that state budget cuts are the primary driver of tuition increases. Two words: administrative bloat!