Bubble alert!

Hat tip to Professor Mark J. Perry and his always-fascinating Carpe Diem blog, where today he points out a dangerous bubble that has yet to burst -- the "higher-education college-tuition bubble."

Professor Perry's chart shows that the price of the average college tuition has increased by over ten-fold since 1978 -- far outstripping the price increases of the average "basket of goods and services" measured by the CPI each year. He notes that "the college tuition bubble makes the housing price bubble seem pretty lame by comparison."

Both Professor Perry and the article he cites by University of Tennessee law professor Glenn Reynolds make some reference to the fact that this "tuition bubble" is being fueled by access to cheap credit from lenders who are "eager to encourage buyers to buy." Neither directly pointed out that the lender most responsible for fueling the recent explosion of college costs has been the federal government (just as Fannie Mae and Freddie Mac in the housing bubble -- a role rarely mentioned by politicians or the media and two entities who are not even addressed in the House and Senate's so-called "financial reform" legislation).

The government has since taken over student lending entirely, which makes it difficult to tell when the college tuition bubble will finally deflate, but deflate it will, when the irresistible forces of innovation and disruptive technology finally catch up to it.

We have written a little on the subject of higher education previously, during the graduation season a year ago, in "Intellectual Affluence." We recommend it, along with this week's articles by Professor Perry and Professor Reynolds to all recent graduates, upcoming seniors, current collegians, and their families -- and congratulations to all members of the Class of 2010!

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