COLLEGE TUITION: NOBODY PAYS RETAIL, EXCEPT YOU

The increasing cost of college has been a headline topic for over twenty years.  It basically goes something like this: annual college costs have risen x% a year, while the rate of inflation is only y% a year.  For the sake of numbers let’s use 3% and 9%.  While that 6% differential may seem inconsequential, the power of compounding over the decades has yielded a number like this one cherry-picked from an article linked to below: Since 1985, the overall consumer price index has risen 115% while the college education inflation rate has risen nearly 500%.  

All of the above is pretty much undisputed: college costs have risen much faster than inflation.  What is in contention, is the reason “why?” Some articles take the angle that college presidents and senior staff are paid outlandishly, others about how big capital projects like luxury dorms, lounges, and athletic facilities have added to costs.  Of course these type of stories have been overshadowed since 2008 by the ramifications of the higher tuition costs: the huge increase in student debt and defaults.

Lost in the haze of this outrage and vitriol, is the real reason for college costs gapping inflation: few students pay the full sticker price.  All this talk about college costing 50, 60, or 80 thousand a year is applicable to very few.  Unfortunately, if you are reading this website, you are probably one of that few.  Furthermore, you are probably not a member of the uber-wealthy, for whom this is a trivial amount.

What you are though, is a subsidizer of all those who do not pay full price. Continue reading