<p>I wondered if there were some college finance professionals on here who would opine on this? Is it the case that easy government backed student loans and other government sources of income for the colleges have been the major contributor to college price inflation over the last 30 years? </p>
<p>To my eye it looks like colleges got into a race to the top building fancy facilities and trying to attract top name professors while assuming there would always be a steady supply of rich parents willing to do anything for Junior.</p>
<p>Very low income students would get Pell grants and work study subsidies that come up to about 12% of the list price of an expensive private college. All students can get federal direct loans that come up to about 11% of the list price of an expensive private college. There has to be something beyond those programs that allow the list prices to continue rising.</p>
<p>The assumption that college education leads to a successful lifestyle causes a high demand for college admissions. With the supply of colleges constant and demand of colleges increasing, price of tuition inflates. </p>
<p>The primary cause of the huge tuition increases over the past several decades has been the erosion of public subsidies for colleges. The spending per student at public schools is actually pretty flat in real dollars, but the portion paid by the public has been decreasing while the portion paid by tuition has been increasing.</p>
<p>Another factor is the fact that people are now looking for “the college experience” as opposed to the good old days when they were merely looking for an education. So now we have to have private bathrooms instead of communal ones, a vast menu in the dining halls instead of the two entree options that used to exist, more study abroad opportunities and the like. </p>
<p>I find a lot to agree with in the article below from the National Association of Student Financial Aid Administrators. What I find most interesting is the discussion of the effect of technology on the price of higher education. Key points that stand out to me are (1) public university tuition has gone up as demand has gone up and state funding has gone down as taxes have gone down, and (2) discounting of tuition for some families means the list price goes up for the rest of the families. Nothing profound there, but just the economic realities. The economic truth is that for every discounted tuition, someone else is paying the bill. There is no free education, and there never has been.</p>
<p>I think the author may have a bit of a blind spot when it comes to the idea of administrative bloat contributing to the rise in cost, and he does not mention the impact of faculty pensions and health insurance benefits, but it is an interesting discussion and may shed some light.</p>
<p>There is truth to this, yes. That the government has certain programs in place from PELL to PLUS, does give teh colleges the ability to milk that money and direct families to those sources. Pell is supposed to be a entitlement that the poorest families get ON TOP of financial. I don’t know a single school that doesn’t integrate their financial aid with it. A reason why colleges insist that every single student who can file FAFSA has to do so even if those colleges use PROFILE is so that they can use the entitlement money as the first dollar in building the financial aid package. IF a school decides a kid should $50K in aid, and he is eligible for $5K of PELL, though the way PELL Is constructed, the kid can get that $50K of aid from the school AND that $5K of PELL for a total of $55K, the school grabs that $5K of government money, leaving $45K left to fund. Then there are the student loans which some schools won’t put in their aid packages but often leave an amount as a required student contribution that a lot of kids use that loan to meet, or that full Direct Loan amount of$5500K is the next piece of federal aid that is put in the package. So, yes, you can see that very clearly how it works. Right there one can raise the price by those amounts and take the money that the government is giving to the students. </p>
<p>Also as long as there are those loans that parents can get (PLUS and the cosigned loans), there are folks who do not have the resources to pay for a college who will take those loans Fine and well if they can afford them, but these loans because they are government backed and are not easily discharged (practically impossible) even due to bankrutpcy, are often taken by folks who would not get penny one from anyone else. They really should not be borrowing this kind of money. You don’t have to have a job or income to qualify for PLUS, so a parent making zip and having no money can sign for close to a quarter million dollars in these loans, even more without any plan of paying them back. It’s pretty danged clear that in some scenarios that is madness. Only the government would do this. </p>