In a new post at the College Conservative, writer Colin Snell points out that the education bubble is very much like the housing bubble.

Student Loans: Making College Unaffordable

The concept of federal student loans sounds like a great idea because we all want young Americans to be able to afford an education. This is the thinking that has propelled the various federal student loan initiatives of the last 40 years. These programs, such as Sallie Mae and the Pell Grant program, are well intentioned. However, one of the greatest mistakes we make as observers of government is evaluating the intentions of programs rather than investigating their track record. Sure, subsidized student loans sound like a great “investment” in education, but they have acted as an agitator rather than an aid in the struggle to pay for college.

According to statistics from the National Center for Education Statistics, the average cost of tuition for 4 year schools increased from $924 in 1976 to $19,991 in 2006. That is an increase of over 2,000%! This rise in tuition has occurred in spite of federal efforts to curtail expensive college costs. Ironically, the largest increase in tuition costs occurred after the Feds started subsidizing loans! We have reached the point now where acquiring a student loan from the government is easy. They made it that way because students, unproven borrowers, would have a hard time finding loans in the marketplace.

However, now when everyone is granted a loan, colleges can price gauge. Since they are receiving guaranteed money, whether it is from the student or the government, they have no incentive to keep their prices low and competitive. Without federal loans, colleges would not be able to get away with staggering tuition costs; the market would boycott, forcing tuition to lower levels. There is a growing college tuition bubble that will soon pop, as the housing bubble did.