I remember reading an article describing how college costs can be explained by an analysis of supply and demand. There have been a variety of historic reasons for demand rising at different times - mostly related to unemployment and lack of other economic choices. I keep hearing the meme that low-cost college is the cause of college expense - but college is free in many countries where they are doing quite well. So I question the facile opinions I keep hearing.
College in the US is used by employers as a proxy for intelligence, something that's an outgrowth of laws and court rulings that date back to the '70s.
So if you want to put yourself on the path to the C-Suite in a Fortune 500 company or to a partnership in a major law firm, you have to get into one of the very top colleges in the country. That, in turn, means top colleges can charge pretty much whatever they want and it's still worth the money. Not because of the instruction students receive, but because getting admitted is highly competitive and those students managed to do it. In other words, it's a positive feedback loop driving up prices for a scarce resource.
Even when you get out of the nosebleed tier, colleges are easy to rank by their accept/reject ratio. So if you're a big employer and you have a candidate from Brown (acceptance 9.5%) and one from Cornell (acceptance 15.1%), you'd probably prefer the one from Brown, everything else being equal.
The sad part is adding more money just makes the problem worse for the same reason adding money to real estate markets just makes everything more expensive.
> That, in turn, means top colleges can charge pretty much whatever they want and it's still worth the money.
The most prestigious colleges actually don't charge much money, except for families that can easily pay. Financial aid, including stipends for living expenses, is extremely generous at elite schools. The sticker price might be high, but few people actually pay it.
The problem is more with second tier schools that aspire to greater prestige but have more limited financial resources. While many of these schools offer perfectly good educations, they don't really open the same kind of doors that going to a more elite school can. A big tuition price can make parents think they're sending their kid to a really elite school - just like people often will assume a more expensive diamond ring is better than a less expensive one. But it's probably not really worth the money.
I've seen this mentioned several times, and I wish I had realized this when I was younger. I didn't even bother to apply to top tier schools even though I would have probably been accepted there because I knew my parents weren't too well off and I didn't think they'd be able to afford to support me, and I really hated the idea of taking out big college loans ($20k+ per year to go to school just seemed insane to me at the time... now 20 years later it's the average tuition + lodging at my local public university!?!).
So instead I only applied to in-state colleges, thinking I was being sensible and pragmatic by doing so. But there's a chance I would have paid less at the top tier schools than I ended up paying for local schools.
That's absolutely a thing, and the knowledge of that fact is more limited than it should be. At my alma mater, I had friends who were getting almost a full scholarship. They left with only a few thousand dollars of debt (as opposed to tens of thousands) because they were able to pay off most of it with a part time on-campus job like being a lab technician.
It's an example of how inequality along financial or racial lines can be real despite there being no theoretical reason for it: if you don't know that you could attend a top tier university and leave with very little debt, you'll consider applying as a student. If you don't, then you've preemptively rejected a very good opportunity for upward mobility. Too many people just don't know because their families or communities don't play the college admissions "game."
Above and beyond that, and to crib on one of the grandparent comments re: "Eventually, demand will decrease if prices continue increasing":
If the minimum barrier to employment is having a college degree, then people will continue doing whatever they have to in order to get a college degree.
The only way you're going to change demand is if decent jobs start being created that don't require a bachelor's degree. And I don't see that happening...
Electricians, plumbers, etc. all make very good money without 4- year degrees. But nobody aspires to these professions nowadays - everybody assumed they must go to university.
New Zealand has a reasonable education system where tertiary vocational education is treated on par with a two-year degree, meaning one can still be a professional and then spend just two extra years to achieve a college diploma, if they so desire.
But it's not about "making very good money"--you look at who runs the country and it's a tiny few who attended a select group of institutions. It makes the whole "American Dream" concept a huge lie. But you can't tell a kid "you'll never be a CEO" but chances are if their father isn't one and they don't go to a big name school, they truly will never be one.
The American dream isn't about becoming C-level or running the country.
College is oversold but the American Dream is alive if you go to a cheap school and buy a house in a smaller city or burbs. There are plenty of great cities and emerging ones with jobs and reasonable cost of living.
However, if you choose to buy crap you don't need and succomb to debt, that's not America's fault. That's yours.
But yes it's dead in LA, NYC and SF. You have to be a top performer there. But that's just supply and demand. Nobody owes you the American Dream in those cities. You aren't entitled to it.
Never lived in a place that didn't need doctors or CEOs, either. "Become a tradesperson" is useful advice for an individual, and completely useless as a solution to the economic problems of non-coastal towns.
I'd urge you to explore some other great cities like Nashville, Minneapolis, Chicago, Austin, St. Louis, Milwaukee, Denver and all the suburbs and even small towns surrounding them.
You're so hung up on the CEO thing which is irrelevant. We don't need more CEOs just like we don't need more lawyers and doctors. And you mention doctors - those are needed in any town of size anyway. My own grandfather was a doctor in a rather small town outside of Little Rock and he did very well for himself and sent 4 kids to college, one to med school. His son is doing the same thing now as a doctor in Memphis.
The American Dream is alive and well: it's just changed. It's no longer "graduate college, get a good job, buy a home and be set for retirement"
Too many people just aren't adapting and are frustrated because they are sinking themselves with poor decisions like crippling debt.
I know people w 200k school debt that graduated with degrees targeting jobs that tap out at around 80k that are way more competitive than any tech or marketing occupation. Makes no sense.
My uncle makes 100+k selling tools out of a town of 6k people. My father in law makes 150k+ in HVAC out of a suburb of about 50k people. They both own their homes outright. One didn't go to college.
People don't want to learn general crafts like sales and they don't want to learn crafts that get their hands dirty. Their parents keep pushing them into college which provides less and less value and tons of debt.
The American Dream doesn't go away just because less people are realizing it. It goes away because people are being stubborn and we have a nation of financially ignorant and wreckless citizens.
I urge you to look past the suburbs that ring metro areas, and a bit further out.
I've just driven out to Whidbey Island this past weekend - a 70 minute drive from Seattle. Beautiful place. Economically, it's also dying, and not because the people who live there are lazy bastards. If it didn't have a US Navy base, it would be dead. As a young person, you'd be insane to stay there.
In order to feed your uncle and father-in-law, small towns must have something to export.
It could be lumber. It could be coal. It could be applications for social security. It could be people, who work in the city, and live in their community, 40 miles away. But it has to be something.
Small towns that have an export - one big enough to feed all the doctors, cops, plumbers, politicians, realtors, teachers, babysitters, bricklayers, HVAC installers, and other people who bring no money into their economy can do reasonably well for themselves.
Those that don't are in a death spiral, and it won't matter if you replaced every person in them with a skilled contractor overnight.
I see what you're saying and a lot of small towns that once thrived are dying but your argument doesn't prove the dream is dead because:
1) the American Dream has included a college education as a general requirement for quite some time now. People that live in small towns, esp. mid-sized ones that rely on Naval bases or other similar economic drivers as the example you provided generally aren't part of this group
2) it ignores that the Dream is alive and well elsewhere
Nobody should expect to get a college education and go live in any given town and be set for life. That's not practical. Economies change, but the opportunities are still out there.
If you believe people should be entitled to make a living wherever they grow up (or choose) forever, then yes the American Dream doesn't exist because your expectations are out of line with capitalism.
That's not fair; it's alive if you aren't stubborn with occupational choices and where you live. It sucks to move but people need to get over that fear.
>The only way you're going to change demand is if decent jobs start being created that don't require a bachelor's degree. And I don't see that happening...
I do. At the lower end, if employers can't afford to pay people enough to make their loan payments, they'll start hiring people without debt.
Right, but people with loan payments can't take jobs that won't allow them to make the payments. If they can't take those jobs, the jobs will go to people without degrees.
Well, a bit more than 10% are, based on the student loan delinquency rate.
The worry I have is that if the automation worries are born out, then you're going to have an inflexible debt loan (student loans) meeting a market that offers fewer jobs (due to automation).
But wait. The more colleges charge for tuition, the harder it becomes for intelligent but poor people to get admittance. Therefore, the worse a college degree from a "top college" can act as a proxy for intelligence.
State U is just fine for a technical degree, but you're diminishingly unlikely to be a CEO of a large company you didn't start yourself. Or a partner in a big NYC corporate law firm.
> I keep hearing the meme that low-cost college is the cause of college expense
I think you've misunderstood what you're hearing: low cost college by definition can't be the cause of high cost college.
The claim is that high availability of funds/liquidity for college is what pushes up prices,since there are more dollars available to chase a supply that hasn't kept pace[1].
> college is free in many countries where they are doing quite well. So I question the facile opinions I keep hearing.
This doesn't really make any sense. Colleges that are provided for free are a lot less dependent on markets to determine prices: they treat them like a more or less generic public good (where college choice is determined by quality of student more than ability to pay).
[1] strictly speaking, the supply hasn't been that constrained, but since college is largely perceived as a positional good, this affects all but the bottom rung for-profit colleges.
> The claim is that high availability of funds/liquidity for college is what pushes up prices,since there are more dollars available to chase a supply that hasn't kept pace[1].
Exactly. It's no different to what causes a real estate bubble: Extremely low interest rates and lax lending policies make borrowed cash very cheap, which pushes up the amount that the average buyer can 'afford' to borrow.
