In a fascinating blog, Doug Short (of DShort.com) finds that college costs are soaring above the growth in income:
The top 5% of households saw their real incomes increase by 71.5% . . . the growth of college tuition and fees, up 596% since 1980. Mind you, that’s 596% above the core rate of inflation, which increased by a “mere” 160.4% over the same time frame . . . College tuition and fees are another matter in several respects. Not all households incur these costs, and they happen over relatively short periods of time. Also, the costs may be split between households — parents, children and occasionally grandparents — and financed over time. But one hypothesis we might formulate from the data is that college for lower-income families create an enormous debt burden. Unless the education purchased helps to move its recipient into the higher income quintiles, its value is no bargain.
And he is using total income over this time-period, the growth in after-tax income would be much lower. So, in a nutshell, the cost of college has grown, just as with any business, to the point where there are no economic rents left to be earned. Any surplus that use to go to the college graduate is now absorbed up-front by colleges. The debt burden is a vestige of that absorption.
IMHO, if Wealth Alchemists are going to be defeated we need more entrepreneurs and fewer college graduates . . . and it does seem as if the two are inversely correlated.
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