Thursday, December 15, 2011

The Next Trillion Dollar Bubble

One of the oldest economic maxims, “if you subsidize something, you get more of it” has created the next trillion dollar-plus bubble for which American taxpayers will be on the hook. - Front Page Mag

More money available for borrowing by students has led directly to massive increases in tuition. Those increases substantially exceed the actual costs of the education itself. The Cato Institute reveals that it costs roughly $8,000 to educate an undergraduate at an average residential college, even as a private four-year university averages $37,000 to attend and a public equivalent averages $16,000. The resulting profits allow colleges to expand their facilities, their bureaucracies and their amenities, leading to higher tuition charges.

Hence, a vicious cycle: as college tuition costs increase, the government makes more funding available to students to pay for them. The more funding available–guaranteed by the taxpayers, so that colleges never face the possibility of a loan default–the more they can raise their tuition costs without ever having to worry about getting stiffed.... The American taxpayer, on the other hand, is getting stiffed with increasing regularity.