The hypergrowth of college tuition is on the minds of many as the under age 30 unemployment rate keeps creeping higher. Tuition costs no longer have any connection with potential future earnings. We've seen the charts that show a neverending rise in college tuition. This problem has many inputs. It is a perfect storm of bad policy. Due to the media's need to cover for it's cathedral buddies in academia, we can only hear so much of the story. Where is the series that audits a big name university? Why do media reports constantly cite the rise in student loans and tuition costs but never ask why tuition is going up? Some reports mention how public universities do keep private tuition costs in mind when they set their rates, and that private universities do look to certain schools (Ivies + the sister schools) as a yardstick or parade leader. No report ever brings up the foreign exchange element: both students and exchange rates. The sinking of the dollar in the international market since 2000 is part of the reason why college has outpaced inflation the last 10 years.
Ron Unz's article on college admissions was a nice wake up call to the folks out there on the outside not realizing how weird the make up is of America's elite schools. One thing not really discussed was the higher percentage of international students at elite Ivies compared to normal colleges. Yale and Cornell admit that 17% and 19% of their undergrad students are international students while Princeton and Harvard say international students make up 11% of their total (Harvard contradictions here). The Harvard/Princeton numbers seem off, especially considering how they bragged several years ago about admission classes being 15-20% international. Compared to the average private school or a very good public university, those numbers are way out of line. The University of Michigan is a fantastic school yet international students only make up 5.7% of their undergrads (31% of graduate students, thanks cathedral!). Harvard and their ilk have a worldwide pool to draw from versus more regional or state sized pools like many other colleges. Their elite label helps boost demand and offers them a different type of student: the rich foreign kid. Ivy applicants are smart kids, the rich kids of the USA, and the rich kids of foreign countries. More rich kids means fewer students who are sensitive to price increases. Foreign rich kids also change the tuition concerns because of exchange rates.
The USDX, which is the US dollar composite exchange rate, hit 121 in 2000. The euro was trading at roughly .80 cents to 1 euro. As the FED engaged in money printing starting in 2001, the USDX slid to 80 in the mid '00s and has not breached 100 since '03. For foreign students, especially European kids, the Ivies became cheap. Ivies and fellow elite schools knew they could charge $30K/year to these kids, as the dollar became cheaper, they knew they could ask for more from these euros and get it because it cost the foreigners the same. Instead of offering a US rate vs. an International rate like state colleges do for tuition, the Ivies said "Fuck Americans" and jacked up the rates on everyone. If you consider the collapse of the dollar since 2001 on international exchange markets, the cost of Harvard or Yale looks the same as they did 10 years ago to a lot of foreign kids (EURUSD changed from .80 to 1.30 therefore 48K now feels like 30K then). Making up 15-20% of the school's populations, the foreign effect has a huge impact to the revenue generated by tuition. America's college system is like an export, we just import the students.
This hurts everyone in multiple ways. First, American students looking at these colleges get roasted just because Harvard wants to make certain they maximize their dollars out of foreign kids. Second, all private liberal arts colleges in the American northeast do 'me too' pricing when they see Harvard raise rates. Tufts, Vassar, Colby, Bates, Swarthmore all get the same applicants as the Ivies. They don't need to even offer a savings in cost compared to Harvard because they know a kid's family was already prepared to pay Harvard rates. It's a sick world, but Cornell and Northwestern were cheaper for me than Bowdoin and Middlebury. This has the worst affect of all on the rest of America as the private colleges in the rest of the nation raise rates because of the northeastern schools, and the public colleges of the northeast raise rates on out of state enrollees first then in-state kids and then the nationwide public rate rise happens. It is a ripple effect that eventually makes its way across the nation, leaving no college untouched.
This is an unspoken ripple effect of the FED's easy money policy that started in 2001. For years, elite schools could have covered every student with the interest off of their endowments. They never made a move to limit the cost to everyday Americans. We need to audit their books. We need to find out why small liberal arts colleges in the middle of nowhere with no new buildings have hiked tuition by 50% in a decade. College became expensive for one set of schools, but eventually made its way down the socioeconomic ladder, down the quality of school pyramid and across the nation. Easy money loans fed the beast and had the unfortunate side effect of being attached to students for life. It's not a conspiracy; it's just bad policy and the unintended consequences of easy money.