[Editor's Note: A version of this post ran yesterday in the Albany Times Union]
The College Board reports tuition is up nine percent this year in inflation-adjusted terms, despite declining prices throughout the economy and stagnant median family income. Parents want to know why the sharp increase and why college costs so much in the first place.
The answer, in a word, is demand. Until we channel higher education demand in a more rational direction, tuition will continue to outpace inflation, grant aid, and family income.
Higher Ed Watch readers know that demand isn't the only factor driving tuition. College supply is relatively limited. Higher education is slow to embrace productivity gains seen elsewhere in the economy. Most important, states cut higher education funding to balance budgets, and colleges backfill those cuts by hiking tuition. Banks act as enablers, supplying big student loans to anyone willing to borrow.
But at its base, tuition rises because suppliers, including those who finance them, take advantage of high, under-informed, and often irrational consumer demand. As families shop colleges this fall, they would be well served to focus on value. The Department of Education can help by protecting consumers from the worst deals. We need a lemon law for colleges that cost too much and deliver too little.
Barack Obama wants to give families a refundable $4,000 tax credit for college if their children complete a required amount of community service. It's a fine, conventional Democratic idea. It could be a lot more powerful, though, if Obama coupled it with an old Republican favorite -- depositing his $4,000 credit into private accounts like the so-called 529 plans that so many upper-income families use to save for college. 
