Remember when the chancellor, provost, and student leaders hosted “Tuition Talk Day” at the Brickyard two weeks ago? Me neither. Barely anyone went, and for good reason. Absences tend to be the side effects of a youth disillusioned with bureaucrats.
In fact, the Board of Governors just approved an 8.8 percent increase in tuition, the cost of which is already way too expensive, but we shouldn’t be asking why banks are preying on us. We should be focusing on how these government-run universities are able to charge so much for a mediocre education in the first place.
This tuition bubble was easily predicted by Austrian economists. The Austrian Business Cycle Theory explains how loose credit expansion, whether through the manipulation of interest rates by a central bank or cheap loans from the federal government, leads to an unhealthy misallocation of resources.
In the case of tuition, one “blower” of the bubble is the Higher Education Act of 1965 ( HEA ), which has been reauthorized nine times since Lyndon Johnson first signed it into law. Various supplements to the legislation, including the College Cost Reduction and Access Act of 2007 ( CCRA ), still compel students to risk a lot of money for the promise of a future white-collar career.
The HEA gave more federal tax money to universities and provided low-interest loans to students in order make higher education more accessible. These factors involve both taxpayer-guaranteed Stafford Loans (with subsequently lowered interest rates) and the CCRA’s advancement of this goal through raises in the Pell grant ceiling.
Only two years after George W. Bush signed the CCRA , federal funding for Pell grants increased from $13.7 billion to $36.5 billion. And herein lays a major catalyst.
You see, Pell grants do not have to be repaid like regular loans do. The federal government, by sponsoring the program, becomes the market’s consumer (replacing the student). Universities see this as the chance to own the richest customer on Earth.
Unlike ordinary people, the government’s wallet does not end; therefore there is no price that the Treasury account cannot afford. Universities are then able to increase tuition costs in an effort to rake in extra funding for sports arenas, art theaters, and other PR commodities that will lure in new students and new Pell grants. Many students don’t get Pell grants, though, and when tuition costs once again become too high for them, it gives the government another opportunity to explain why higher education is so expensive that we need more federal money.
The cycle never ends. Even Joe Biden understands this phenomenon.
It certainly seems nice to give students “free money” each year, but it deflects the value of conscious capitalism. Students, drunk on their Pell grants and other forms of financial aid, no longer wisely consider which classes they take. While undergraduate enrollment has increased by about 50 percent over the past 25 years, the number of students majoring in highly-demanded fields—science, technology, engineering and math—has remained stable, even dropping at many points.
Should we really be surprised that 85 percent of college graduates move back into their parents’ homes?
How depressing for those who haven’t yet entered universities. Tuition costs will continue to rise at a quicker rate than the savings rate, making it nearly impossible for parents to save up for their children’s education. It’s a sad end to a phase of the American dream, but we’ll soon see employers accepting the view of Gerald Celente : “The mentality is […] businesses won’t hire a person unless they get a degree. Not me. I don’t care if you have a degree. It makes absolutely no difference.”
Yet I’m still left wondering why N. C. State doesn’t at least use open textbooks.
Don’t worry, though, Board of Trustees—we’ll get to that topic soon enough.
