Bubble Planning

Private colleges are increasing tuition "only" 4.3% this coming year, according to a NAICU survey - the smallest increase since 1972-73. Congratulations are in order - inflation went negative in December 2008, so this raise is only 5% above what we're likely to see next year!

Endowments went famously negative too - here's a picture.

These consistent tuition increases are a big reason why the public is not sympathetic to cries of poverty coming from public universities, who have been raising their fees like mad as well. Tuition hikes been so much higher than inflation for so long -- up 440% in the past 25 years while the CPI was up about 110% -- that people are talking about a "higher education bubble": "Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking whether it is worth spending $1,000 a week to send their kids to college." Good question.

My only disagreement with this is that a bubble is something that hasn't popped yet. For higher ed, that bubble did pop - though private tuition pricers don't seem to have grasped this fact, while public universities are still forced to use tuition increases to replace state funding cuts.

That doesn't work either. Tuition increases aren't showing up in the classroom. Remember the Delta Project study that concluded, in IHE's summary,

There’s not much evidence to suggest that students at public universities are getting more for paying more. Between 2002 and 2006, average tuition at public research universities increased by nearly 27 percent or $1,419, but the spending on each student only went up by 1 percent, or $149.

It takes special genius for higher ed to have gotten here: its product is more popular than ever - unlike, say, GMs - it constantly charges its customers more, and yet per dollar it is delivering less.