College Education Tuition Costs
Saturday, Dec 19, 2009
Started in 1701, Yale is one of the oldest colleges in the United States, and has good historical records. Below is a graph of tuition costs, enrollment, and population since 1787.
Notice that tuition rates stayed mostly constant even as population and enrollment increased (until 1952). In particular, in the period from around 1850 to 1940, the height of the Industrial Revolution, tuition rates stayed constant as enrollment increased dramatically, without any state or federal student aid.
In 1952, tuition rates jumped and then went exponential. In 1951, Yale received its first monetary federal research support [yale.edu]. In 1958, the federal government began its first student loan program, the National Defense Education Act, followed by many other student aid programs.
Libertarianism has two main arguments for why government causes high tuition costs. First, student aid bids up prices. Most students are unacceptable loan risks for private companies-- an average 18 year old making very little is unlikely to pay back a $5,000 per year private loan. So the government stepped in to provide student aid. This effectively gives money to students which the private sector would not give. The students then use this to bid up tuition costs. In the absence of aid, the students simply couldn't afford current levels of tuition, but colleges wouldn't simply take less students or close. They would cut costs like any other business. Second, economies of scale and technology should decrease price and cost, and increase the capacity for more students. There are more students and there should be increased productivity for the administration and teachers, so cost per student should drop. Most colleges are inefficient because the level of student aid is a practical guarantee for certain revenue levels, so there is no incentive to cut costs. Politicians use this fact to push for more student aid, which pushes prices even higher.