SHOCKER: Colleges Stop Exorbitant Price Increases After Congress Caps Student Loans

America’s colleges and universities have finally stopped their practice of annually gouging students with price increases for tuition, fees and room and board — to the accumulated tune of a growth rate of 400 percent in the last three decades.

Labor Department statistics collected by The Wall Street Journal show that aggregate tuition increases in 2017 rose 1.9 percent in 2017. This figure accords with the overall rate of U.S. inflation.

From 1990 to 2016, college tuition costs had increased at an average rate of 6 percent annually, which was more than twice the overall inflation rate for the same period.

This year’s steep decline in college cost increases has many causes.

One cause of the decline is the decision by Congress to stop raising the maximum amount of federally-subsidized student loans which college students can borrow to finance their educations. Congress has not increased this maximum amount since 2008, the Journal notes.

Subsidies cause the price of any good or service to rise. College administrators continually raised prices year after year — and decade after decade — precisely because the federal government generously subsidized those price increases with more and more student loans. Administrators responded rationally to the government’s allowance of bigger college loans by raising prices for college.

Now that the federal government has kept maximum borrowing rates the same for nearly a decade, college administrators have responded to the new economic reality by limiting price increases.

Other factors causing colleges to rein in their prices are societal and demographic.

For example, the United States now has 33 percent more schools offering two-year and four-year degrees than it had in 1990 but college enrollment across the nation has decreased over 4 percent from its 2010 pinnacle.

While a strong economy is causing fewer older people to seek new skills, a far bigger reason for the decline — and for a continuing decline in future years — is that there are fewer college-aged students because of declining birth rates.

The trend of fewer classroom bodies will almost certainly persist even if the economy remains perpetually robust because of the low birth rates. The Western Interstate Commission for Higher Education projects that high school graduation rates will remain stagnant until at least 2023, according to the Journal.

Also, the higher education group expects the number of white high school graduates — the demographic which tends to attend college the most — to decrease.

The decline in student enrollment is causing some schools to shut down, especially for-profit colleges and universities.

Private colleges and universities, which tend to be more expensive than their public (and publicly-funded) peers, are also suffering because of student enrollment declines. Many public community colleges and some public universities have also been hit hard by enrollment declines.

Also, the Journal notes, while colleges and universities have stopped increasing prices so much, they are still increasing prices. And, because tuition has become so expensive in the last 30 years, a small percentage increase can still be a decent chunk of cash.

At a fancypants private school like Wesleyan University where a single year of tuition, fees and room and board costs $66,970, a 1.9 percent increase would cost students and parents about $1,270 each year.

At the taxpayer-funded University of Illinois at Urbana–Champaign, where a single year of tuition, fees and room and board costs $27,176 for state residents, a 1.9 percent increase would cost students and parents about $516 each year.

A study by the Federal Reserve cited by the Journal indicates that close to 40 percent of Americans who are younger than 30 and who have not attended college say they are put off by the immense cost. A similar number of college dropouts under 30 also said cost was the reason.

Student loan debt continues to rise annually in the United States. Some 44 million Americans hold $1.31 trillion in student loan debt, the Federal Reserve Bank of New York reported earlier this year.

To put this $1.31 trillion figure in perspective, Americans hold $779 billion in outstanding credit card balances, a figure nearly half the size of the total student loan burden.

Or think about it this way: The enormity of the U.S. student loan mess is larger than the entire annual economy of Russia, where the nominal gross-domestic product is $1.26 trillion annually.

Still another way to think about it: the amount Americans collectively owe on student loans is more than the annual gross domestic products of the Netherlands, Greece and Chile — combined.

Of the $1.31 trillion in outstanding student debt, some $31 billion, is “seriously delinquent,” meaning the debtors are at least 90 days past their payment dates. Another $32.6 billion of the total debt is “newly delinquent,” meaning that the debts are at least 30 days past their due dates.

Data from the National Association of College and University Business Officers tracks the total endowment value of 832 colleges and universities in the United States. In 2014, the total value of these schools’ endowments was $516 billion — more than the GDP of Norway. The schools also averaged an impressive investment return of 15.5 percent in 2014.

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