Have a look at the following graph showing that college tuition has outpaced CPI inflation by a huge margin.
College Tuition and Fees Vs. Overall Inflation from 1985 thru 2011
What Has Caused This Surge In Tuition Cost?
But this group of people, who are now of college age, is a small echo of the original baby boom. Have a look at the following graph of births per 1000 population from Wikipedia. You can see that slight "bulge" in birthrates from 1980 to about 1992 is not enough to explain the tuition inflation "bubble."
Births per 1000 population from 1909 to 2009
The Real Reason For Tuition InflationFrom Inflation Data dot com, Gordon Wadsworth, who spent 19 years in college financial aid gives us the answer:
..the main reason tuition continues to rise is a dramatic change that took place regarding the Federal Stafford Loan more than a decade ago. When Uncle Sam opened the floodgates to government-backed student loans without parent income restrictions in 1992, colleges welcomed the news with open arms. The sudden injection of millions of additional aid dollars only furthered tuition increases. Add to that the government’s continued promotion of the Stafford Loan as a low-cost program, and you have the formula for hyper-inflationary costs.
When the government made it exceptionally easy for students to borrow massive amounts of money, the colleges followed the lead by increasing their tuition rates. This combination led to record-level borrowing. Today the average undergraduate student loan debt is nearing $20,000. Those who go on to graduate school often end up with an additional $30,000. Law and medical students report an average accumulated debt from all years (undergraduate and graduate study) of $91,700.
Student Loan Bubble and Upcoming BailoutsIn my blog Student Loan Bubble and Bailout, I detail how the amount of college debt has risen dramatically since 2000 and now that debt has become unsustainable with rapidly rising default rates. This is a direct result of rising costs and a depletion of credit-worthy borrowers. There's no one credit-worthy left!
The amount of student debt outstanding is now $1 Trillion vs $250 billion just 10 years ago. This flood of easy money is likely to end in another bubble bursting with more bad debt bailed-out by the Federal Government.
Remember, it was a flood of easy (under-priced) money caused the housing inflation and subsequent bubble with the government, including Fannie Mae and Freddie Mac and government tax incentive at the epicenter of that bubble. The collapse of that bubble created a huge crisis and surge in government deficit spending.
Expect More Crises
Expect more crises caused by clueless and/or disingenuous people in Congress. It won't end until these people are voted out of office and the Federal Reserve is ended. But that's another upcoming blog post.