Barron’s D.C. man examines market forces addressing higher education problems

Jim McTague of Barron’s is not as concerned as other observers about rising college costs. He explains why in his latest “D.C. Current” column.

You parents with young children: There’s no reason to get bent out of shape about the college-affordability crisis. Nor is there any rationale for President Barack Obama to butt in. The free market already is addressing the problem of soaring tuition costs, primarily via the Internet. Just as the ‘Net profoundly changed the business dynamics of the newspaper industry, the retail industry, and countless other industries, it is rapidly altering higher education, bending the cost curve downward. Obama wants the government to create a cost-benefit analysis of colleges and universities, which would take years of bureaucratic head-scratching, if it ever happens at all.

The average new college grad holds $26,500 in student-loan debt versus about $15,000 in 2004. According to the Federal Reserve Bank of New York, this is the only form of consumer obligation that has grown since consumer debt peaked in 2008. “Balances of student loans,” it says, “have eclipsed both auto loans and credit cards, making student-loan debt the largest form of consumer debt outside of mortgages.” Outstanding debt is close to $1 trillion, versus $350 billion in 2004.

Enter Internet entrepreneurs. At the University of Maryland University College, which offers online undergraduate programs, a four-year degree costs $30,000 for in-state residents and $60,000 for out-of-staters. That’s a steal, compared with most not-for-profit four-year colleges and universities where costs easily can exceed $100,000. Currently, total enrollment is 95,000 students. Last week, Georgia Tech, along with Udacity and AT&T (ticker: T), announced creation of an online master’s degree program at the bargain-basement price of $6,600.

Despite abuses that Barron’s has chronicled over the years—including the recruitment of unqualified students by some publicly traded Internet schools merely to boost revenue and profits—online education is booming.