Demographics, fewer young people, demand for labor and higher salaries may result in fewer young people compelled to take out large loans and attend college. But the experts think college demand will continue.
Even if it wins Supreme Court approval, the Biden administration’s one-time forgiveness plan won’t fix the long-term problem of rising higher-education costs, the New York Fed economists wrote. “Absent direct policies to address this growing burden, taxpayers may be again called to for relief in the future.”
Source: Bloomberg – Bloomberg
In fact, inflation adjusted college expenses have gone down for two years. In part due to students dropping out during the pandemic, perhaps.
College tuition increases are among the highest cost increases among all services and goods and can even exceed health care inflation.
Experts engage in hand-waving over what drives high inflation in college tuition (more student services, more administrators, etc).
But notice something about this pattern in price hikes?
Looks like there may be a generation-long cycle in this. It would not be a “perfect” correlation because a larger percent of young people attend college, versus prior generations, and the U.S. has increased the percent of both immigrants as well as international students from abroad.
The effect would create increased demand in a cycle – and demand enables colleges to increase prices.
At the far right we are seeing a collapse in college pricing power. With a much smaller cohort lined up to just about start college later this year, college pricing power may continue to be weaker than it has been.
Look at about age 16 and below – the incoming college classes, moving forward, are going to be shrinking. Bloated colleges will not be able to raise tuition when too many class seats are competing for a shrinking pool of students.