Student loan subsidies blamed for nearly all college tuition increases

A new study from the prestigious and scrupulously non-political National Bureau of Economic Research (which designates the beginning and end of recessions) blames student loan subsidies for nearly all of the tuition increases that have caused college education to become so expensive as to financially cripple families and indebted students.  Professor Alex Tabarrock explains the highly technical paper at the Foundation for Economic Education:

Grey Gordon and Aaron Hedlund create a sophisticated model of the college market and find that a large fraction of the increase in tuition can be explained by increases in subsidies. (snip)

Remarkably, so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay. (snip)

…the Econ 101 insight that subsidies increase prices (even net for those who are not fully subsidized) holds true.

I wonder where else (& here) we could apply this insight?

The higher education industry has become rich and fat off its ability to raise prices at a rate roughly triple inflation over the last five decades. Because intelligence tests are forbidden to be used by employers (as supposedly discriminatory), the only way to sort through job applicants by intelligence is through the rough proxy of a college degree. As gatekeepers to careers, colleges have been able to exploit the vulnerability of students (and parents) seeking to be hired by employers offering good prospects.

Student loan debt, incurred to pay for skyrocketing college tuition, is a ticking time bomb in the American economy, roughly the same sie as mortgage and credit card debt. But unlike mortgage or credit card debt, it cannot be discharged by personal bankruptcy.

It should be noted that higher education is one of the major sources of donations to the Democratic Party and Democrat presidential candidates.  So some of the subsidy money for higher education ends up being laundered, indirectly, through higher education, into the coffers of the Democrats.

A new study from the prestigious and scrupulously non-political National Bureau of Economic Research (which designates the beginning and end of recessions) blames student loan subsidies for nearly all of the tuition increases that have caused college education to become so expensive as to financially cripple families and indebted students.  Professor Alex Tabarrock explains the highly technical paper at the Foundation for Economic Education:

Grey Gordon and Aaron Hedlund create a sophisticated model of the college market and find that a large fraction of the increase in tuition can be explained by increases in subsidies. (snip)

Remarkably, so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay. (snip)

…the Econ 101 insight that subsidies increase prices (even net for those who are not fully subsidized) holds true.

I wonder where else (& here) we could apply this insight?

The higher education industry has become rich and fat off its ability to raise prices at a rate roughly triple inflation over the last five decades. Because intelligence tests are forbidden to be used by employers (as supposedly discriminatory), the only way to sort through job applicants by intelligence is through the rough proxy of a college degree. As gatekeepers to careers, colleges have been able to exploit the vulnerability of students (and parents) seeking to be hired by employers offering good prospects.

Student loan debt, incurred to pay for skyrocketing college tuition, is a ticking time bomb in the American economy, roughly the same sie as mortgage and credit card debt. But unlike mortgage or credit card debt, it cannot be discharged by personal bankruptcy.

It should be noted that higher education is one of the major sources of donations to the Democratic Party and Democrat presidential candidates.  So some of the subsidy money for higher education ends up being laundered, indirectly, through higher education, into the coffers of the Democrats.