Posted by
Brent Tuominen on Tuesday, April 22, 2008 12:33:36 PM
While reading Thomas Sowell's excellent piece,
The Economics of College, I was struck by a thought. How much does government subsidizing a college education, through both grants and student loans, actually increase the cost of college tuition. It would seem to me that when government infuses additional money into the system, under the justification of making college more affordable, it causes there to be more dollars chasing the same limitted number of seats, especially in the nation's "elite" universities. More dollars chasing limited resources seems to be a recipe for inflation in that segment of the economy, which, perhaps coincidentally, is precisely what we have seen.
It would seem to me that there is a market in the private sector for education, and that at any given time there is a certain number of dollars available to be devoted to it. By introducing additional funds, especially in the form of government subsidies, we really don't add to demand, as there are still the same number of people wishing to attend college (in fact, the cost of college may actually reduce demand), nor do we increase supply, as the same number of seats are available. We instead are merely inflating the cost of a college education, and in the process increasing the debt load of those just starting out in life. Hardest hit in this will naturally be the children of the middle-class - those that must rely more on loans than on grants to finance their American Dream.