Why College Tuition Goes Up

David Frum of the American Enterprise Institute says,

Just about every economist agrees that [instead of making college more affordable] federal student aid has the opposite effect: It enables colleges to raise tuition even faster and even higher than they otherwise would.

Now, the average price of U.S. college tuition is rising twice as fast as the overall rate of inflation, according to the College Board. Only the health care sector has raised its prices faster.

As with healthcare, more money does not translate into better results. College seniors on average scored only 1.5 percentage points higher than college freshmen in their knowledge of history, economics and international relations, according to a recent survey.

Worse, the survey showed that seniors at the most prestigious and expensive schools actually scored lower than freshmen. That suggests that the principal effect of $200,000 worth of Georgetown or Yale may encourage students to forget all the AP material they covered to get into those schools in the first place.

While student knowledge declines, academic pay rises. 112 of America's college presidents now earn more than $500,000 a year.

Most industries deliver constantly-improving products at steadily declining real prices. Healthcare and higher education, the two great exceptions to this rule, are also the two most government-subsidized sectors in the U.S. economy.

More subsidy is not the solution to the problem. The subsidy is the problem.

In fairness to universities, the survey he mentions was devoted to questions on topics such as American history and government, political thought, international affairs, and the market economy. I'm not saying these aren't important, but it's not what a lot of people teach.

Milton Friedman presented another argument against subsidies:

What happens when the educational market is distorted? Look at state colleges and universities. Their fees are generally very low, paying for only a small part of the cost of schooling. They attract serious students just as interested in their education as the students at Dartmouth or other private schools, but they also attract a great many others. Students who come because fees are low, residential housing is good, food is good, and above all there are lots of their peers, it's a pleasant interlude for them.

I can't see much interest in cutting subsidies, though. By the way, pay in our department is below average. Is that a good thing?