And everything that I look for I know I will one day find
I'm a fool so I'm told I get left in the cold
Cause I will search the world for that fool’s gold
Graham
Parker 1976
$42,000 a year! That's
what a friend recently told me it cost to go to Indiana University, my alma
mater. I had a great time there, and
it's a pretty good school, but if you think your kid will be able to pay back
$168,000 before they turn 35 with an IU degree, you're dealing thin. The same could be said of just about any
school in the country.
Skyrocketing college
tuition has become a hot topic, with Time magazine recently devoting their
front cover to it. Many private schools
have blown past $20,000 and $30,000, and are now in the 40s and 50s. The average debt a student has after school
is above $25,000, and for plenty of them it’s over six figures. The strange
thing is that most articles that discuss the price don't even talk about the
reason that it's going up, just the hardship.
It's as if somebody had a killer disease and all the doctors were only concerned
with treating the symptoms, without figuring out what caused the problem in
the first place.
Hopefully the following
example will explain why prices are rising and how to quickly cure the disease:
Let's say you start a business
that makes widgets. You decide to charge
$10 for each one. Unfortunately, you find out that the huge majority of your
customers can't afford this price. You
quickly realize that you're going out of business unless you lower the price. Just as you're about to do so, a man named Fast
Freddie comes to town.
Freddie's a great guy;
all he wants to do is help people. He starts
loaning all your customers money so that they can afford the $10 widget. You're thrilled, as now you don’t have to
lower prices. As time goes on you decide
to test how nice a guy Freddie really is. You raise your prices to $15. Obviously no one can afford it. But Freddie steps in and lends even more money
to your customers, so they can cover the $15.
You, being the sharp businessman that you are, keep raising prices
because you, like everyone else, like money.
Before you know it, the widget that should be about $5 costs $50. There's no end in sight. As long as Fast Freddie keeps lending your
customers virtually unlimited amounts of money, you're going to keep raising
prices.
You
get this, right? Over 90% of college loans are now paid for by Fast Freddie, oh
I mean the government. This has completely and totally distorted the free
market, to the point that we have runaway inflation in college tuition.
The
solution is simple. Get the government out of the moneylending business for
college, and watch costs plummet. But
this is not going to happen. Why? Politics, like virtually everything else it
seems nowadays. No politician can get up
and tell the truth. He would immediately
be criticized as a coldhearted, out of touch snob who is especially biased
against the poor and middle class, who can least afford the sky high cost of
college tuition. The sad thing? The current system hurts the poor more than
anyone. The rich guy or gal can either
pay for tuition or have to borrow very little, so their kid doesn’t graduate
with an oppressive debt load. It's the
poor and middle class that are now getting out of school as indentured servants.
Go
ask your father or grandfather what college cost before the government got
involved.
Have
a good night everyone.
JR
