Perhaps the market works after all…

Does “the market” work? Have government subsidies corrupted its operation in higher education? Is there a higher education bubble? Do educational markets work to reinforce the privileges of those already in possession of social advantages?

I don’t really know the answer to any of these questions. But I do know that a lot of people have complained about the ceaseless increase in tuition. Up, up, up… without end. But something that cannot go on forever won’t, and to quote one of my favorite movies, “Great storms announce themselves with a simple breeze.”

Is that a fluttering leaf I see?

Students who are unable or are unwilling to pay the full price of tuition are being wooed by colleges and universities through tuition discounts. The discounts offset published tuition and fees and come in the form of institutional grants and scholarships. Depending on their financial situation, academic standing, or athletic ability, students at the same institution can end up paying different amounts as a result.

* * * *

According to a survey by the National Association of College and University Business Officers, in the year 2012, the average tuition discount rate for full-time freshmen at private schools rose to a record 45%, marking the sixth consecutive annual rate increase.

So does this mean that the market works after all? Does this mean that college is becoming more affordable?

Eh, maybe. This sort of thing has been going on for years — with universal need-blind admissions and its less stark counterpart, non-universal need-blind admissions. The question is whether the record-setting tuition discounts are resulting in a net decrease of average total tuition costs.

Otherwise all that’s going on is redistribution of tuition dollars (and tuition increases) from some students to other students.


  1. Of course markets work. So if you make vast amounts of cash available via loans to students, tuition costs rise and college presidents build luxury resorts.

    But bubbles don’t go on growing to infinity. The question now is when this one bursts, who gets bailed out and who pays?