Cost of College Educations Going Up; No One Knows Why...

Jonah Goldberg at National Review loves to point out the stories in the news that come up on a fairly routine basis trumpeting something like "Prison Population Grows Even as Crime Rate Declines". Usually found in the New York Times or some other equally unreliable rag, this kind of story never quite is able to make the connection between the two variables.

We have another example of this kind of (non)thinking this morning. Some very important lady tells us that college costs are going to rise. Later in the article, we learn that there has been an increase of 6% in money available for federal student loans. No thought is given to the connection between the two. Well, no, that isn't exactly true, there is some thought in the sentence that reads, "Rising college costs coupled with the economic downturn also have more students lining up for financial help". Except that the thought is too much in one direction. The expanded availability of financial aid makes college more attractive to more people (a.k.a demand). Also (by the way) a downturn in the economy means people lose jobs....making them available for....higher education funded by student loans! Because expanding university class sizes are fairly stable, supply remains unchanged. What happens with an increase in demand with no increase in supply? Price increases.