Why are college tuition and college textbooks so expensive?

WINTERY KNIGHT

As subsidies increase, so do tuition costs As subsidies increase, so do tuition costs

This article from Investors Business Daily is very helpful.

It says:

Grey Gordon and Aaron Hedlund, economists at Indiana University and the University of Missouri, developed a method to test various explanations for the share rise in tuition costs. Is it state funding cuts? Or the increased wage premium for a college degree? Or is it related to general cost increases in the services industries?

Not exactly. In a working paper published by the National Bureau of Economic Research the economists report that these factors contributed insignificantly to the rapid rise in tuition between 1987 and 2010.

What did account for almost all of it was, ironically enough, the massive explosion in federal aid over the past several decades. Federal aid — in the form of subsidized loans, grants and tax credits — shot up 134% in the past 15 years, according to…

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