Cheap Credit and Higher Education Tuition

Like most parents of young kids, I spend a good deal of time trying to convince myself that university is a waste of time. It is partly because I’ve been there and I know it is largely a waste of time, but mostly because of how absurdly expensive higher education is and how much more expensive it will be before my (young) kids go.

Part of the problem is, of course, cheap credit. The ready availability of state support, whether through state schools, bond issues, or student loan programs has made it easier for tuition costs to rise rapidly over the last twenty years, as cost ascend merrily to match governmental credit-fuelled munificence. Check the following figure from Donald Heller for some relatively recent data:

tuition-bubble

Can there be any doubt that this cannot continue? While higher education sits apart from much of the credit crisis, or at least has so far, it will have its turn. To the extent that its costs are predicated on income from loan-fuelled students, and its operations requires further cheap credit, that will steadily (and in some cases speedily) change in the coming years — or at least that’s what I try to convince myself.

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