As the parent of a sixteen year old, I will admit a bit of self-interest in this column.  But I am convinced that there is quite a bit of dysfunction in the higher education system, leading to ever-higher tuitions. 

Right now, tuition and fees at many private schools are over $50,000 per year.   Indeed, increases in college costs have substantially exceeded the rate of inflation for many years. Paul Caron, a taxation professor, calculates that housing prices have increased by four times since 1978, amid fears of a housing bubble, but “college tuition has now increased by more than twice that amount since 1978 — it’s gone up by more than a factor of ten times”.

This steep rise in education costs inflicts significant hardships on many families, particularly upper middle class ones who are not really wealthy, but are above the threshold for financial aid.   Educational institutions will boast about their high number of scholarship students and “need blind” admissions. While some of these programs are appropriate, they also have a huge effect on parents paying all or most of the freight for their own children’s education while also having to subsidize large number of other people’s kids.

Student loan policies also contribute to distortions in the pricing system by providing large amounts of seemingly “free” money that in fact must be repaid. Many students feel compelled to take large educational loans and then find it extremely difficult to pay them back while attempting to pursue the normal life path of a college graduate. The loans are basically not dischargeable in bankruptcy, which is probably reasonable, but the result for many twentysomethings (especially in this economy), often unfairly labeled as slackers, is that that they are forced to move back with their parents.   

Colleges do not seem to be particularly interested in holding down tuition. Selective colleges apparently do not compete on price, and it is almost a sign of prestige for a college to have very high student costs. Indeed, many colleges do not hold down administrative costs and their fundraising efforts seem to focus on large new campaigns to build impressive new buildings on campus rather than on raising money for the general fund that might moderate tuition. Some projects are particularly questionable. The New York Times recently reported on a state university building a $15 million state of the art training facility for its new women’s lacrosse team, a squad that had not yet played a game

Glenn Reynolds, a University of Tennessee law professor and Instapundit blogger, suggests that the higher education bubble is about to burst. In his view, people are becoming increasingly skeptical about the value of college and are willing to go to cheaper schools rather than run up debt. He also believes that there will be increasing demands for educational experiences that produce actual increased value in the job market. This does not necessarily exclude a rigorous liberal arts education, if it provides a good general education, rather than a smattering of easy and trendy courses. Mr. Reynolds suggests the real pioneering will be in online education and the “work of ‘edupunks’ who are more interested in finding new ways of teaching and learning than in protecting existing interests”.

Perhaps, as Mr. Reynolds suggests, the education bubble will indeed burst and there will be far reaching structural changes. But the better solution, at least in the short run, would be for educational and governmental policymakers seriously to take into account the needs of those who actually pay the bills.