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Comment by ericfrenkiel | Hacker News Reader

For-profit universities and the "free" federal dollars they collect are the very reason why we have exorbitant inflation in the education sector that is incommensurate with general inflation.

Except for the Tier I elite universities, there is no reason for a college education to cost $40k-$50k a year.

What is worse, student loans are the one type of debt that cannot be cleared through bankruptcy, meaning that millions of young adults of our generation will suffer decades of reduced incomes as they try to dig themselves out of debt for degrees that did not result in high-paying jobs.

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Your argument lacks sense. Care to elaborate on how greater supply leads to higher prices?

He should have left out the for profit universities as part of the problem (they're a symptom not the cause). It's all about the free federal dollars. The parallels to the housing bust are pretty clear. Cheap and widely available mortgages led to exorbitant housing prices and an eventual bust. Cheap, widely available, and undischargable loans for education are leading to exorbitant education costs. It'll be interesting to see how this bubble ends.

just addressed that in another comment. another side effect is increased revenues to these institutions caused a rampant increase in spending across the board - personnel, buildings, facilities, departments, etc. - that are now no longer sustainable.

It's not so much as greater supply as artificial price insensitivity as it relates to increased tuition rates. Because the federal government will continue to cover the loans, it creates incentives for institutions to collectively raise rates since they know students - i.e. their customers - are essentially price insensitive (borrowing future dollars to pay for an exorbitant education today).

Making it easy to pay with someone else's money (whether or not it must be paid back later) distorts pricing in any market.

The problem will eventually correct itself, albeit with widespread economic pain.

That's a rather pat explanation that doesn't seem to explain things such as the rampant rise of tuition at state colleges and universities.

The fact that the comparables are rising in price, and aid is available, makes the hikes at state schools thinkable.

The budget problems in states then force the issue.

Federal subsidies aren't the only reason for higher-educational inflation but there are growing hints that subsidies get largely captured by fee-increases. See for example these discussions:

http://www.bloomberg.com/news/2011-12-09/u-s-universities-fe...

http://www.mindingthecampus.com/originals/2012/02/why_they_s...

So the price rises to find equilibrium with the amount of financial aid available.

Similar to the cost of health care in the US.

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