Monday, April 5, 2010

Why does Higher Ed cost so much?

Why, it's the federal student loans of course. Peter Schiff, who was one of the few prominent voices warning about the Nasdaq bubble and then the housing bubble, explains the problem and the culprit.

First came the government student loans for those in "need". Many of those students may not have chosen college otherwise, as they would have had to put college off and work to save enough to pay tuition. But instead, they had federal money to throw at the education industry. They used it.

As basic economics would tell us, prices skyrocket for those not considered in "need", which includes the middle class and higher. The loans had bid up the price of education. Soon enough, the non-needy can't fathom saving such a ridiculous amount of money for college. So, why not borrow? Everybody else is doin' it!

Enter: Private student loans.

That is the stuff bubbles are made of.



    Maybe highed ed costs so much because licensed attorneys can make more money as balloon artists. You see, the training in "critical thinking" really helps one to design complex shapes with balloons.

  2. Pete for Senate!!

  3. College tuition has risen more rapidly than the overall inflation rate for much of the past century. This is mainly because of prestige games among universities, gold plated amenities and other factors.

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  4. GAO again has shown that increases in student loan borrowing maxima do not lead to increases in tuition.

    As another example, the federal student loan limits barely increased at all from 1980 to 2008, yet this was a period of intense increase in sticker price tuitions, room & board -- well beyond the CPI and other inflation measures.