[spamizbad]

I'm not exactly Mr. Free Market, but as far as I can tell the market appears to be functioning as intended.

People place a very high value on what they perceive to be a good college education, and this value is typically how much student debt they can acquire. There are well-known ways to significantly cut the cost of your college education: going to in-state schools, and conducting the first two years of your education at a community college. Despite this many people shun in-state institutions (unless they're in a state like California which has numerous highly regarded public universities, but then again they're all hard to get into), and even more laugh the the notion of Jr. College, determining it only fit for misfits teens and continuing adult education Note: I don't agree with that assessment, but it serves to illustrate the fact that college has become so closely tied to social status, making pricey schools all the more desirable.

As for what's driving tuition upwards, it's probably the fact that the modern University has become a luxury resort. They've got an array of clinics, career councilors, psychologists, paid tutors, entire buildings designated for non-athletic student recreation, bike and jogging paths, numerous social groups, reasonably well-maintained facilities and immaculately manicured campuses.

Further driving costs upward, besides state budget shortfalls for public universities, is the fact that they are very aggressive at handing out scholarships to attract top-notch students, along with the significant amount of marketing that is conducted to get everyone else to shell out big-bucks for their undergraduate programs.

And when you look at study after study that shows you're going to earn significantly more over your lifetime if you get a college education, is it any surprise people are willing to eat the high upfront costs? Paying $50,000 to a student loan for an additional $10K+/year in earnings potential seems like a bargain to me. Granted, it's not always going to work out for the best, but hey you gotta take risks to get ahead.

[jplewicke]

Another possible reason for tuition increases is Baumol's Cost Disease ( http://en.wikipedia.org/wiki/Baumols_cost_disease ), in which the relative cost of providing a service grows rapidly because it hasn't had productivity improvements. When the amount of time needed to teach someone how to compose an essay hasn't changed since before 1960, it's not surprising that it's gotten more expensive compared to the price of microwave ovens.

Since most of our economic activities experience greater productivity growth than we've seen in education, it's not surprising that educational expenditures are growing faster than inflation. I'm hopeful that this will change as web-based education goes mainstream.

[yummyfajitas]

the cost of college is also highly subsidized. That's not exactly a functioning market, although the market part of the system is responding to those non-market incentives. That's probably why college has turned into a luxury resort. If you aren't paying the full price, why not go to the school with free rock concerts and a yoga room?

I think a possible solution might be to require that if a college gets government subsidies, it must make it's services separable. That means students get the option to not pay for (and not participate in) student activities. Of course, there should be no government subsidies for non-essential services.