University Business - July 2008 - (Page 12)

EDITOR’S NOTE A Very Bumpy Ride A S I WRITE THIS, OIL IS AT $135 A BARREL; gas pump prices have topped $4 almost everywhere. Some airlines are charging a $15 fee for the first checked bag—on top of a $25 fee for checking a second bag—to help offset fuel costs. The price to feed a family of four averages about $908 a month, according to the USDA, up $80 in just two years. The housing market continues its collapse, with foreclosure rates up 48 percent from this time “By encouraging prices to rise more than they otherwise would, last year. In his June 7 column, Washington Post business columnist policymakers are fostering a tuition bubble,” he writes. The problem is that bubbles tend to burst. And they can Steven Pearlstein tried to put it all in perspective. “Fundamentally, they are all part of the same story—the be very messy when they do. What will happen when the tuition bubble bursts? Indestory of the global economy purging itself of large and unsuspendent schools that are largely tuition tainable imbalances that for a time allowed driven might be forced to close their many Americans to think they were richer The problem is that doors. Even more financially stable inthan they really were,” Pearlstein wrote. bubbles tend to burst. stitutions will have to dramatically reMixed in the middle of that mess, of think their approach to attracting topcourse, is college tuition. And they can be very notch students, if fewer students are A new report called “A Tuition Bubmessy when they do. able to pay higher tuition costs. And, ble?” by the Center for College Affordwith students graduating with everability and Productivity (www.college affordability.net) warns that college tuitions are following a greater debt (the class of 2006 averaged $21,100, according dangerously similar pattern to the housing crisis. College tu- to the Project on Student Debt), many prospective students ition has risen at a record-breaking rate since 2001. As with might think twice about ever going to college at all. Economists had warned about the impending housing the housing crisis, economists say tuition costs are driven in part by artificially low interest rates and a lack of lending stan- crisis for a number of years, yet little was done to forestall it. With many signs pointing to tuition prices following a dards. “Part of the problem is that public policy attempts to sub- similar path, we can’t ignore the warnings again. Lawmakers sidize attendance for too many students on the assumption and the higher ed community need to work together quickly that this will increase access to higher education,” writes An- to correct what is clearly an unsustainable trend. If, as Pearldrew Gillen, the report’s author. “These subsidies, intended to stein says, the global economy is purging itself of large and make college more affordable, are ineffective because schools unsustainable imbalances, higher education may be in for a maximize prestige rather than profit, and because the lack of very bumpy ride. any measure of their output rules out normal price competition. These characteristics imply that subsidies will not lower the financial burden of higher education for students, as colleges and universities raise prices to exploit the increased ability to pay that the subsidies bring about.” Gillen maintains that these government subsidies, intended Write to Tim Goral at tgoral@universitybusiness.com. to increase access, have instead “encouraged” schools to raise prices more than they otherwise could, creating a vicious cycle. 12 | July 2008 universitybusiness.com http://www.collegeaffordability.net http://www.collegeaffordability.net http://universitybusiness.com

Table of Contents for the Digital Edition of University Business - July 2008

University Business - July 2008
Contents
College Index
Company Index
Advisory Board
Editor's Note
Behind the News
Viewpoint
Money Matters
Financial Aid
Human Resources
Students in Need, Schools at the Ready
Security Officers Speak Out
Advancement Goes Digital
A New Day for NASFAA
Sustainable Admissions
What's New
End Note

University Business - July 2008