Obama Gets an “F” in Tuition Economics

January 28, 2012 by  
Filed under Economics

The vote buying season is in full bloom, manifested by President Obama’s speech decrying the rising cost of a college education.

The President is a smart man. Why does he embarrass himself this way?

Colleges and universities raise their tuition much faster than the rate of inflation for two reasons. First, too many of their customers (students) don’t care enough about what it costs to go to college.  These students are receiving  gobs of loan money to pay those costs. The government makes students even less sensitive to college costs by guaranteeing the loans, thereby artificially maintaining low interest rates.

When buyers don’t much care about the cost of what they are purchasing, why should the sellers keep costs low? This econ 101 stuff.

The second reason that tuition increases are out of control is that universities continue to expand their bureaucracies. They seem more interested in cultural education than practical education. For example,  the  “diversity and inclusion”  apparatus at many colleges is sucking huge amounts of money from the primary educational mission.

Here is one article that discusses this second point and yet a third reason why the President gets an F in tuition economics.  At the same time that the government is pushing too many students into college with cheap loans, it is requiring colleges to make sure that the costs of attending exceed the amount of money that can be borrowed.


Read it for yourself:  Obama Fosters the Skyrocketing Tuition He Criticized.

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7 Responses to “Obama Gets an “F” in Tuition Economics”
  1. RB Boren says:

    Under Obama’s plan, tuition rates will necessarily skyrocket.

  2. Jane says:

    If you graph the total cost of higher education per student, you’ll find that the cost tracks the general inflation rate for service industries. The reason tuition costs have risen so much faster than that is that the percentage of total higher education costs coming from government spending has dropped by about 50% since I was in college back in the dinosaur days. Without as much taxpayer support, the costs are falling more and more on students and their families. With average age-adjusted wages stagnant or declining for the same time period, more and more college educations were financed the same way everything else has been…by borrowing.


    Unless you want to see a dramatic increase in government direct support of colleges at par with what it was a generation ago, to call for cutting programs providing loans to aspiring college students is just a way of saying you want to see dramatically fewer people going to college, namely, most all the poor, working class and much of the middle class in America. To specifically condemn “diversity and inclusion” programs, as you have, is to tell us the complexion and gender of the people you want to see out of the Ivy halls.

    Colleges and Universities are a major source for creating human capital, cultural capital and relatively independent research. We need all three public goods. Please, don’t let your politics get in the way of doing the right thing for America.

    • I absolutely want to see fewer people going to college because too many of them never graduate anyway. These “students are unprepared, go for the lifestyle – not the education, borrow, drop out, then what? They should be going to more affordable and local technical schools or other career path programs.

      Your reference to “complexion and gender” is laughable, Jane. I assume you are worried about women. Not to worry – they are by far the dominant gender in higher education and that happened way before the explosion of on-campus “diversity and inclusion” bureaucracies.

      • Jane says:

        1. Do you also “absolutely want to see fewer people going to” high school as well? 30% of those who enter America’s high schools don’t graduate. That is less than the 40+% who enter college and don’t graduate, but the principle seems to be the same.

        2. What makes you think having a family with enough wealth to afford to pay college costs is an adequate criterion for selecting potential college students who are prepared, who resist whatever you meant by “the lifestyle” and who will not drop out? Similarly, what makes you think the children of wealthier families aren’t better suited to attend “local technical schools or other career path programs”? Finally, what makes you think those you would financially exclude from college would attend local technical schools, etc.?

        3. I’m not sure why you assume I worry about women to the exclusion of anyone else, but purely as a matter of fact, your timeline as to when women came to outnumber men in college is in error. The “diversity and inclusion” programs and offices on campuses date from the “affirmative action” programs of the 1970s coming out of Civil Rights legislation and court rulings from the 1960s and very early 1970s. In 1970, 57% of graduating college students were male. It wasn’t until the 1980s that women began graduating from college in equal numbers to men. 2011 was the first year men and women reached approximately equal numbers in graduate school.

        4. Referring to my comment as “laughable” really isn’t the way to build up your blog’s readership, you know. Moreover, although I am glad that you got a good laugh, please be aware that showing contempt for the ideas of those who disagree with you just serves to isolate you intellectually.

  3. Brandon says:

    Are you a tax volunteer this year? I look forward to that series every year (and is honestly the major reason your blog is in my Google Reader).

  4. rick beagle says:

    TML, I think it is fair to say that your politics got in the way of your article. Poorly done sir.

  5. John says:

    Interesting stuff here. I think that you’re right about college education going up because students aren’t demanding lower prices. Another thing that keeps prices high? The availability of STUDENT LOANS! Don’t you agree? When people can so easily go into debt, why should they care about prices (well, they should, but you know what I mean).

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