Higher Education Bubble Update; New York Daily News Calls It a "Government-Sanctioned Racket"

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The College Board released new data this week on 'Trends in College Pricing" for 2010, and reported that four-year public universities raised tuition this year by 8%, almost twice the 4.5% average increase for tuition at America's private universities. That differential follows a well-established pattern over the last decade of higher tuition increases at America's public universities than at private schools (see the chart above). Public university tuition has increased faster than private tuition in each of the last four years, and in eight out of the last nine years, by an average of 3% per year. As the chart above shows, the trajectory of college tuition in the U.S. is on a path that makes the recent housing bubble seem like a minor historical footnote by comparison.

In assessing the College Board data, a NY Times article 'As College Fees Climb, Aid Does Too' finds some 'good news,' but only by reversing cause and effect:

'The good news in the 2010 “Trends in College Pricing” and “Trends in Student Aid” reports is that fast-rising tuition costs have been accompanied by a huge increase in financial aid, which helped keep down the actual amount students and families pay.'

The New York Daily News does a much better job of reporting the true causal relationship in an editorial that could be titled 'As College Financial Aid Climbs, Tuition Follows:'

'College financial aid comes largely from the federal government. Meaning, out of your pocket. And ours. And out of the pockets of families scraping to raise that extra 8% for tuition. A government-sanctioned racket is what it is. States cut back on assistance to schools, so the schools raise tuition. Then the feds jump in, dish out billions in taxpayer dollars in student aid, and tuition goes up again. And again (see chart above).

Meanwhile, those fortunate folks who inhabit the groves of academe feel absolutely no need to hold the line on expenses. They ought to be ashamed, most of all for sending so many graduates out into the world with diplomas and loan statements showing a near-lifetime's worth of debt.'

And this ongoing 'higher education bubble' is especially troubling at a time when economist Richard Vedder reported recently that millions of students with college degrees not only graduate with debt, but "are doing jobs that the BLS says require less than the skill levels associated with a bachelor’s degree." Some of those jobs include bartenders, janitors, and food preparation workers, all the more reason to call it a "government-sanctioned racket."

Thanks to Gregory Tetrault.