PPI In the News

The Real Problem with Colleges’ Business Model

In the Slate blog Money Box, Mathew Yglesias argues that the decrease of college graduates’ earnings is related to the irrelevant business model followed by most colleges. He uses Diana G. Carew’s graphs from her blog post “Is the Labor Market for College Grads Looking Up?”.

Below is an important chart from Diana Carew of the Progressive Policy Institute showing the falling earnings of college graduates in the 25-to-34-year-old bracket.


And that right there is the simple problem with the existing higher education business model in the United States, which has involved aggregate per student spending that rises faster than inflation for a long time. This has relatively little bearing on the missplaced worry about whether or not college is “worth it” (the relative earnings of college gradatues are still high) or on the overhyped idea that online education is going to disrupt traditional learning. The real issue is simply that people can’t spend money they don’t have on tuition, nor will banks want to lend people money that they aren’t going to have.

Read Yglesias’s blog post here.