Alright all you parents with sons or daughters in college here’s a question: What’s the average debt load of last year’s college graduates?
If you said c) $23,200 you’d be right. Today’s Wall Street Journal contains an informative and candid article about students’ ever-rising debt levels and how the very loan system created to help students meet college costs is helping to drive up the cost of college. Ironically, the economic recession has accelerated the pace of the cost spiral by increasing college enrollment and the demand for student loans.
The current mess only serves to validate one of the great laws of economics: if you subsidize something, you’ll increase demand. Federal and state student loans lower the cost of education but distort the true price of education. Colleges respond to the higher demand by increasing costs – and the cycle continues. That even some college administrators and government bureaucrats are beginning to see the pernicious effects of the government loan system is encouraging.
Want to stem the rise in college costs? Limit student aid. If you want to be popular with the kids, that’s a whole other question.