Tuition hyperinflation is creating a dangerous economic bubble. Over the last 25 years, college costs have grown 2.5 times faster than the inflation rate. If students paid $10,000 in 1986, today they fork over $59,800.
The U.S. government is the root cause behind this trend.
The Higher Education Amendments of 1992 revised the Federal Stafford Loan program to remove restrictions that tied loan amounts to parental income. The change flooded colleges with tons of cash and gave administrators a strong reason to increase costs ad infinitum.
Many high school graduates want to forego university altogether.
Debt and unemployment closes their eyes to the long-term value of a post-secondary education. It’s a classic case of hyperbolic discounting. People discount the value of a later reward by a factor that increases with the delay in reaping it: if Bobby’s degree doesn’t net him a job now, his degree isn’t worth much later.
But a post-secondary education helps Millennials -- the trendy label attached to the 18-to-29-year-old generation -- exploit opportunities presented by the global economy.
Our nation’s youth only need to look as far as the intense lobbying efforts of several Fortune 500 companies as proof. Companies like Microsoft (Nasdaq: MSFT) and GE (NYSE: GE) want the Obama administration to lift restrictions on importing highly skilled labor from Europe and Asia. There are not enough U.S. workers to fill their hiring needs.
Anxious parents have two possible options to quell their unease: First, they can send their children to less expensive two-year community or four-year state colleges. It’ll keep debt down and give their children an education with the same quality as private institutions. Second, compel legislators to put income restrictions back into the Stafford Loan Program.
College graduates are essential to the long-term U.S. economy; higher education is a must.
Jamie Chandler is a political scientist at Hunter College in New York.