Amanda Ripley, writing in the Atlantic, takes a long and thorough look at the cost of college in America and concludes:
Ultimately, college is expensive in the U.S. for the same reason MRIs are expensive: There is no central mechanism to control price increases. "Universities extract money from students because they can," says Schleicher at the OECD. "It's the inevitable outcome of an unregulated fee structure." In places like the United Kingdom, the government limits how much universities can extract by capping tuition. The same is true when it comes to health care in most developed countries, where a centralized government authority contains the prices.
The U.S. federal government has historically been unwilling to perform this role. So Americans pay more for pharmaceuticals—and for college classes.
If this is what college-educated reporters and editors conclude, maybe college is overpriced. Somehow, plenty of goods and services — Uber rides, aspirin, Atlantic articles, McDonald's french fries — are inexpensive without a central government authority capping prices. When the government does set such price caps, the effect is often to create supply shortages or to fuel black-market or gray-market efforts to circumvent the price controls. Rent control in New York and in other high-priced American cities was basically an effort to impose such centralized government pricing on housing, and it has failed. "Centralized government authority" on prices failed to keep the Soviet supermarket shelves stocked. If such an authority were created for college prices in the U.S., it might be captured by an influential interest group, such as professors.
The nice thing about capitalism as opposed to centralized government authority is that it allows for competition. Frank Bruni reports in the New York Times on St. John's College: "For the academic year that begins in the fall of 2019, it's lowering its yearly tuition to $35,000 from $52,000." At Purdue, Mitch Daniels has frozen tuition for seven years running. According to a Purdue press release:
WEST LAFAYETTE, Ind. — Purdue University President Mitch Daniels on Thursday (April 12) announced plans to hold tuition constant on the West Lafayette campus for a seventh year in a row, extending the tuition freeze through the 2019-20 academic year.
This means students at the West Lafayette campus will be paying nearly the same in tuition and fees as they were in 2012-13, and five graduating classes will have earned their Purdue degrees without ever having a tuition increase. When combined with room and board rates that have been held flat or lowered and potential textbook savings through Purdue's Amazon partnership, current students' total cost of attendance is lower than in 2012-13.
It is estimated that from fiscal years 2013-19 Purdue families have saved a total of about $465 million through the university's deferral of tuition, fee, and room and board increases. Current Indiana resident students would be paying $1,400 a year more if Purdue had raised its tuition by the national average for four-year public universities; non-resident students would be paying $5,560 more per year if tuition had increased by the Big Ten average.
"A Purdue education will be less expensive in 2020 than it was in 2012. This commitment to affordability has kept Purdue attractive to prospective students and has helped save families millions of dollars," Daniels said. "Coupled with continued investments in the quality of our academic programs, we believe Purdue is delivering on our goal of higher education at the highest proven value."
The nice thing about capitalism is that it's not really an "unregulated fee structure." It's a fee structure regulated by market competition, which, as the Purdue and St. John's examples show, in a truly free market can be more effective than "centralized government authority."
There may be ways that the U.S. college market isn't really a free market — for example, if the colleges are working together to try to prevent families from shopping around on price. If so, those potentially anti-competitive practices are probably worth scrutiny.