Rising College Tuition Rates: Economics 101

My daughter graduates high school this year and is making plans to go to college. She will begin studying anthropology which I believe is fantastic since we need more scientists who are also young-earth creationists but that's the subject of another post. Anyway, she did well in high school (3.97 GPA) and is currently 19^th in her class of over 400 students so she will qualify for some scholarships. Even so, we're still going to probably have to help with some of the costs and she may even have to take out some student loans.

In case you haven't heard, college is becoming more expensive every year. In a Wikipedia article that includes a break down of inflation rates between 1978 and 2008, we find the following information:

Cost of living increased roughly 2.5-fold during this time; medical costs inflated roughly 6-fold; but college tuition and fees inflation approached 10-fold. Another way to say this is that whereas medical costs inflated at twice the rate of cost-of-living, college tuition and fees inflated at four times the rate of cost-of-living inflation. Thus, even after controlling for the effects of general inflation, 2008 college tuition and fees posed three times the burden as in 1978.

So how does a middle class family like mine afford to send a kid to college? It seems more and more impossible every year and so there are constant calls for increased government assistance to help students pay for college. In the 2009-2010 school year, more that $154 billion in financial aid was awarded to undergraduate students. Yet the cost of college is rising as fast as the money comes available. Any guesses why?

It just so happens that I too am a college graduate only my major was in business. In my opinion, most politicians in Washington would benefit from a refresher course in economics. There's a very simple principle they teach in Econ101 – see if you remember it: When there is a surplus in the money supply, the cost of goods rises. Hello!! It's called inflation. Ring any bells?

I know it's been a while but we have had some recent periods of economic boom. Every time the economy starts to heat up, the Federal Reserve tries to put the brakes on by raising the Federal discount rate. Why? Because too much money in the economy drives up costs. Even in our current, economic woes, you might have heard that inflation is becoming a concern because the US is simply printing money. More money equals higher prices. Always! Like I said, it's Econ101. Every time the government opens it checkbook (actually, it's our checkbook) to help pay for rising college tuition, they are actually helping to drive up the cost! I don't care if the Feds made $50K per year available for every kid to go to college; in no time at all the cost of 1 year of college will rise to $60K.

If any elected official heeds my advice to brush up on economics, he might also remind himself of the meaning of the term “free market.” If we let the free market do its job, college costs will stabilize at a rate most people can afford. Not only do government subsidies artificially inflate the cost of college, we are doing it at a time when the nation can least afford it. We're leaving a huge public debt that the next generation will have to repay plus we're burdening them with higher tuition costs that many kids have to finance as well. Future graduates will not only have to start repaying huge student loans but will also face enormous tax rates. It's inevitable.

Proverbs 13:22 says that a good man leaves an inheritance to his children's children. What do you call a nation that leaves it's children $20 trillion in debt?