Are The Forces Of Supply And Demand Slowing College Tuition Increases?

See In Reversal, Colleges Rein In Tuition: Prices of higher education are rising in line with inflation as enrollment stagnates by Josh Mitchell of The WSJ. Excerpts:

"U.S. college tuition is growing at the slowest pace in decades, following a nearly 400% rise over the past three decades that fueled middle class anxieties and a surge in student debt.

Tuition at college and graduate school—after scholarships and grants are factored in—rose 1.9% in the year through June, broadly in line with overall inflation, Labor Department figures show. By contrast from 1990 through last year, tuition grew an average 6% a year, more than double the rate of inflation. In that time, the average annual cost for a four-year private college, including living expenses, rose 161% to about $27,500, according to the College Board.

Some schools are offering more discounts and cutting prices.

Abundant supply is running up against demand constraints. The number of two-year and four-year colleges increased 33% between 1990 and 2012 to 4,726, Education Department data show. But college enrollment is down more than 4% from a peak in 2010, partly because a healthy job market means fewer people are going back to school to learn new skills.

Longer-running economic and demographic shifts also are at play. Lower birthrates and the aging of baby boomer children have reduced the pool of traditional college-age Americans. The number of new high-school graduates grew 18% between 2000 and 2010 but only 2% in the first seven years of this decade, Education Department data show.

Another factor: Congress last increased the maximum amount undergraduates could borrow from the government in 2008. Some economists have concluded schools raise prices along with increases in federal financial aid. A clampdown on aid, in turn, could limit the ability of schools to charge more.

Some of these trends may persist. The number of high-school graduates is projected to remain flat through 2023, according to an analysis by the Western Interstate Commission for Higher Education. White graduates, the most likely among races to attend college, are expected to decline over this period.

“The competition is bigger now than it has been, and I think we have more informed consumers,” said Sarah Kottich, chief financial officer at College of Saint Mary in Omaha, Neb.

The small private women’s college cut out-of-pocket tuition 10% for the coming year, to an average $14,600 after aid, its first reduction in at least two decades. Officials made the move after analyzing research from SLM Corp.’s Sallie Mae, a private student lender, showing high prices are a major factor for students when they eliminate schools from their searches, Ms. Kottich said."

"many states are on track to experience budget crunches as the population ages and health-care and public pension costs rise. That could squeeze public support for schools.

Moreover, the number of schools is declining in response to oversupply, particularly among for-profit schools, a trend that could reduce competition and increase pricing leverage for schools that remain open."

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