Monday, October 31, 2011

Supply and Demand

Last week, McCluskey put out a paper that concluded that when government bestows more aid, institutions benefit far more than students. The College Board figured that real average tuition rose some $5,500 for public colleges and $17,800 at private institutions from 1980 to 2010, while total student aid increased comparably, by $8,165. The phenomenon predates this administration. The College Board reports that for the past decade, college tuition and fees have exceeded inflation by 5.6 percent a year. That's where McCluskey believes increased financial aid goes.
"There is no question," McCluskey wrote, "that colleges and universities have been raising their prices at a very brisk pace in recent decades, and that those increases have largely nullified aid increases."
http://www.realclearpolitics.com/articles/2011/10/30/student_loans_--_forgive_and_forget_111860.html

"Average" student debt is $24,000.  This is the realm of wondering whether a degree is worth what it costs.  Can you get enough technical skill to get a career for half that level of debt?  How much non-debt expense is represented in that $24,000 figure?  What is the purpose of a college degree anyway?  Education?  Technical training?  An experience of transition that is stimulating and enriching and perhaps a bit safer than otherwise being 18-22?  A chance to hobnob with the peers of the wealthy? 

It seems pretty clear that the institutions of education, public and private, will get a day of reckoning when the Federal spigot begins to dry up.  Like airline deregulation and the housing bubble, federal intervation always leaves a hangover.

Students, though, may get it better when colleges can only charge an amount equal to how much their product is valued in the marketplace - vice 5.56% "more" annually.

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