That college enrollment in US has sky-rocketed over the last 50 years and accrued almost exclusively to small, unchanging set of 3,200 colleges (see Part 2 of this blog series) is just the first head-scratcher in the story of US colleges.
A second worrisome head-turner, one that I will cover here, is the price of college.
College is one of the most subsidized goods in our society. Federal and state subsidies to colleges total approximately $200 billion annually. These large subsidies include public aid directly to colleges, as well as public aid to students (in the form of student grants, notably the Pell Grant, and in the form of government-backed college loans).
The main beneficiary of this public money is the college establishment (the existing universe of 3,200 institutions) since it has the sole right (given accreditation rules and related regulations) to collect tuition payments that rely on Pell grants, government subsidized college loans, and other forms of public financial aid.
From their sole position as eventual recipients of public aid for higher education, accredited colleges have raised their prices consistently and substantially for decades. For example, college revenues – fueled by public subsidies and related price increases by incumbent colleges – have grown at 7% per year for the last 25 years.
Caught in this inflationary cycle (i.e. a cycle where the government increases aid and the college establishment raises price) are students and families who increasingly deplete household income and take out large loans to meet the ever-rising price of college. Another vulnerable party in this cycle is our government, which constantly issues college-related debt marked by hard-to-predict long-term default rates.