Michael Barone
Markets work. But sometimes they take time.

That's the uncomfortable lesson that proprietors of America's colleges and universities are learning.

For many years, market forces didn't seem to apply to them. There was a widespread societal consensus that a college education was a good economic investment.

Politicians gave lip service to the idea that everyone should go to college. No one should be stopped by a lack of money.

There was historic precedent. The G.I. Bill of Rights vastly expanded college populations and helped build prosperous post-World War II America. Putting even more through college would make us even more prosperous.

So Congress passed student loan and grant programs to make it easier for people to pay for college and university tuitions. That increased potential higher education revenues.

Surprise! Over the last three decades, tuitions rose faster than the economy grew.

For a long time, that didn't seem to be a problem. College still seemed like a good investment during the quarter century of low-inflation economic growth from 1982 to 2007. You could pay off those loans with earnings increased by your degree.

Meanwhile colleges and universities -- and not just the highly selective ones -- competed for students whose test scores would improve their ratings in the U.S. News College Guide by giving "scholarships" that actually were discounts on the tuition list price.

To attract these students, the educational institutions built fancy dormitories, gymnasiums and student centers. And they vastly increased the number of administrators, to the point where colleges and universities had more administrators than teachers.

Government helped to produce an ever-increasing demand for higher education. So higher education administrators saw no need to compete on price. Higher tuitions just gave your school more prestige.

Now the higher education bubble has burst. The Wall Street Journal reported this week that that the average "tuition discount rate" offered incoming freshmen last fall by private colleges and universities has reached an all-time high of 45 percent.

At the same time, their "sticker price" tuitions have increased by the smallest amount in the last dozen years. Tuitions for in-state students at public four-year colleges and universities also increased by the smallest amount during that period.

Applicants are negotiating bigger discounts than they used to. Market competition has kicked in.


Michael Barone

Michael Barone, senior political analyst for The Washington Examiner (www.washingtonexaminer.com), is a resident fellow at the American Enterprise Institute, a Fox News Channel contributor and a co-author of The Almanac of American Politics. To find out more about Michael Barone, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com. COPYRIGHT 2011 THE WASHINGTON EXAMINER. DISTRIBUTED BY CREATORS.COM