An Examination of Tuition Inflation and the Missing Causal Relation Between Tuition and Graduation Rate

Abstract

The high cost of post-secondary education is one of the most important issues hamstringing the United States. Unfortunately, rising costs are both too easily justified by entrenched proponents of the current system and not scrutinized closely enough. Citing demand inelasticity, the high value of a college degree, and abstract quality improvements, has too often proved sufficient in justifying higher tuition. Not enough concern is given to the roughly 45 percent of enrollees who do not ultimately graduate. In this paper, the argument will be laid out that for tuition inflation to be justified, it should result in higher graduation rates. Ultimately, the data shows that while holding all else constant, increasing tuition does not significantly correlate with higher graduation rates. Since tuition inflation cannot be justified, a solution will be offered involving new market-players that provide a more direct educational experience at far lower costs.