
Why College Costs Rise, Even in a Recession  - peter123
http://www.nytimes.com/2009/09/05/your-money/paying-for-college/05money.html
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patio11
Two words: credit bubble.

The combination of government backing and preferential treatment for student
loans vis-a-vis all other forms of credit in e.g. bankruptcy means that it is
one of the few credit markets which has not catastrophically contracted in the
current crisis. That is the system functioning as designed: the intent was to
make it artificially appealing to lend money to students who, by nature, have
no jobs, no assets, and no immediate prospects of repayment, all strikes
against them for any other sort of consumer credit.

What wasn't anticipated was that the combination of the social prestige
attached to a degree plus the extraordinary amount of credit available would
remove any pricing pressure from colleges.

There are also some pricing transparency issues caused by this, much like
insurance causes pricing transparency issues in health care. We've got a young
crowd here, right? Many of you went to expensive colleges, right? Can you
identify the total price of your college education within $1,000?

 _crickets chirp_

Funny how that works. Nobody forgets what the price of their house was, or how
much the angels invested, but when it comes college our best answer is "Hmm,
good question. I think I got a scholarship or something? Maybe somewhere in
the low $100,000 range?"

(Full disclosure: I'm as guilty about this as anyone else. I can tell you what
the sticker price for WashU is and what my student loans ended up being but I
can't reliably account for the hundred thousand dollar difference between
those two numbers.)

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anamax
> What wasn't anticipated was that the combination of the social prestige
> attached to a degree plus the extraordinary amount of credit available would
> remove any pricing pressure from colleges.

What wasn't anticipated by whom?

It might not have been anticipated by students or their parents, but it's got
all the pieces of a con. And like the best con, it's hiding in plain sight.

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anigbrowl
Not just college, it seems.
[http://www.boston.com/news/local/massachusetts/articles/2009...](http://www.boston.com/news/local/massachusetts/articles/2009/09/04/a_library_without_the_books/)
_Instead of a library, the_ [prep school] _is spending nearly $500,000 to
create a 'learning center', though that is only one of the names in contention
for the new space. In place of the stacks, they are spending $42,000 on three
large flat-screen TVs that will project data from the Internet and $20,000 on
special laptop-friendly study carrels. Where the reference desk was, they are
building a $50,000 coffee shop that will include a $12,000 cappuccino
machine._

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kevinpet
College costs rise, "even" in a recession? I recommend taking a look at this
chart over a one year period:
<http://www.google.com/finance?catid=us-63372821>

Education fell less than the market as a whole starting in August, then shot
upwards in October, around the time people understood that this would be a
prolonged depression. One of the biggest costs of education is forgone
earnings. When the job market sours, the total cost of education drops, demand
at a given out of pocket dollar cost increases, and no one is ever going to
lower prices when demand increases.

But that's honestly par for the course with the New York Times. This is the
same publication that employs an economics columnist who can't even manage his
own finances. (Edmund Andrews)

I sort of look at recessions or depressions like an object in an elliptical
orbit at perigee, where its speed is the lowest, and where the smallest push
can have the largest effect on it. Education is one way to spend this time,
but another is to notice that a lot of people try to crawl into a hole and
wait it out. The successes will be those who were willing to take risks when
the economy isn't doing well.

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anigbrowl
WTF^2. I can't decide what's more irritating - the dreadful writing or the
bullshit justifications from (most of) the educational establishment.
Instructive but aggravating.

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yardie
I'll take a guess and say easy access to credit for creditless students. Plus
universities have big 5 year plans with that money; money allocated before the
recession. So most of the capital improvement projects were started when
students, parents, and gov't were looser with the purse strings.

And universities somehow never follow the rules of economics. Scales of
economy fail to kick in when they should. Large schools get larger and the
price per student creeps up, never down. And the building projects get more
extravagant and expensive. At my alma mater you see where the money is going.
Old buildings were built like a brick shithouse. Strong and cheap with a
fallout shelter. The new ones look like the set designer of MTVs Real World
was given the comission. Instead of 2 per room. One student a room for a
spacious 4 room suite. Instead of brick and stone we've got glass and steel.
This wouldn't be bad if alumni paid for them, but when they are named "New
student residence 2008" it means they are waiting for a large donation for a
building thats already built and paid for by students.

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mkramlich
College is mostly (but notice I do not say entirely) a form of pampered post-
highschool luxury resort living for American kids. Only a very small part of
what you get out of it is so-called education, and a large portion of what you
pay them does not go towards just paying to impart that education to you.

I think it is heading for a collapse, or at least a serious adjustment as new
competition arises, especially in the form of all-online, or mostly-online-
enabled education initiatives. If I were to simplify and distill down to it's
core what having a degree means, to employers, it means that said degree-
holder knows X, Y and Z, has applied that knowledge and accomplished some
things with it, an external party has confirmed to the truthfulness of this,
and said party are themselves trustable. Ie, they passed a test(s) by a
trusted test-giver. This is clearly a generalization but that is the essence
of it, and you can deliver that service much faster and cheaper today than
ever before in history.

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jackmoore
Because it's a racket.

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helveticaman
Because they have to compete for goods and services with the government, which
can and does print the money. This means their costs reflect real inflation a
few months ahead of other products.

