Another bubble ready to burst

Thursday April 14, 2011

Audrey Pietrucha

Senator Bernie Sanders added a new victim to the long list in his most recent column -- college students. Sanders complained that the Republican budget proposal would reduce the average Pell higher education grant by 17 percent at a time when the cost of a college education is "soaring."

Having just sent the last of my three children off to college, I cannot argue with Sanders’ description of college tuition costs -- they are, indeed, soaring. Statistics confirm personal observation as, according to the Measuring Up 2008 report by the National Center for Public Policy and Higher Education, tuition and fees for U.S. colleges and universities increased by 439 percent between 1982 and 2007.

Over this same period, median family income rose only 147 percent. In fact, a line graph showing increases in medical, housing and education costs in comparison to the Consumer Price Index has education on top, far and away.

Maintaining the current level of higher education funding, or worse, raising it, does nothing to address the issue of why college costs are rising so much faster than others. In fact, it may be ignoring one of the biggest factors in increasing costs. Much of the upward pressures on college costs can be traced directly to government involvement in education financing. Colleges charge more because the government makes sure the money will be paid.

Aid to college students has increased at well above the rate of inflation over the past few decades. In 1990 the federal government provided $19 billion in grants and loan guarantees. By 2000 that number had climbed to $63 billion. The 2009 federal budget included more than $129 billion in federal assistant to college students, and President Obama’s 2012 budget raises that amount to nearly 167 billion, a $38 billion or 29 percent increase in three years.

It is not unreasonable to observe that once a third party takes partial responsibility for costs, both consumers and providers become a lot more careless about how that money is used.

There are a number of games being played by our colleges and universities to justify rising costs. One is to send out a gazillion brochures to every high school kid who’s even sneezed in the direction of the SAT so as to attract as many applicants as possible. Since there are only so many openings, the school then gets to reject a whole lot of those applicants (and still keep their $50 to $80 application fees) and appear more "exclusive."

The more exclusive they appear, the more they can charge for their services. The current crop of students and their parents have accepted this unquestioningly and have shown a willingness to pay, with help from Uncle Sam, top dollar for what they believe will be a superior education.

Meanwhile, college costs show no sign of moderating and more young people are starting their working lives saddled with significant amounts of debt, only some of which is federally subsidized.

"Cheap" loans lure many young people into higher education despite their lack of serious interest in academic pursuits. That many students are attending college for the wrong reasons is borne out by some disappointing findings: Six-year graduation rates for bachelor’s students is only about 56 percent; college students devote 3.2 hours to education on an average weekday, versus 3.9 hours to "leisure and sports;" and almost half of full-time college students binge drink or abuse drugs, with the incidence of such behaviors rising.

Since these young people still have to repay their loans, whether or not they actually benefit from their time spent in college or complete their degrees, should warrant more caution on the parts of parents, students and institutions.

There are a few colleges that have not joined this circle of folly, and these exceptions help prove the rule. One of them is Grove City College, a small, private liberal arts college in western Pennsylvania. GCC does not accept any money tied to federal funding, including Pell Grants, federally guaranteed student loans and even scholarships. GCC prides itself on being academically rigorous as well as affordable.

For the 2010-11 school year GCC charged students about $21,000 for tuition, room and board. Compare this to the average private college costs of slightly more than $37,000 for the same academic fiscal year. Somehow Grove City is able to provide a quality education without the federal dollar infusion and does it at almost half the average cost.

Government-guaranteed loans and grants distort the true cost of education. If parents and students start refusing to take on excessive debt in order to pay the hyper-inflated tuition rates being fueled by third-party involvement in education financing, we should soon see a downward shift in higher education costs. Wiser consumers could provide the good, sharp pin of which the higher education bubble is in dire need.

Audrey Pietrucha helps coordinate the Vermont Liberty Alliance and can be reached at


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