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In 1980, average annual tuition at a four-year public university was about $2,500 in today's dollars. By 2020, it had crossed $22,000 — a 1,200% increase against 236% general inflation. The machinery behind this spiral is elegantly self-reinforcing. It begins with federal student loans. When Congress passed the Higher Education Act of 1965 and expanded it repeatedly — Stafford loans in 1988, PLUS loans for parents, eventually uncapped graduate lending — it created a blank check. Schools realized they could raise tuition and students would simply borrow more. Economist William Bennett called this out in 1987: government aid enables price increases. NYU economist David Lucca confirmed it in 2015, finding that every new dollar in subsidized loans translated to 60 cents of tuition increase....
Popular framing: Colleges are greedy and parents are gullible.
Structural analysis: Uncapped federal loans give schools a blank check on the demand side; rankings reward higher spending; prestige works as a Veblen good where higher price signals higher quality. Each actor — Congress, universities, families, lenders — responds rationally to incentives the others created, and the reinforcing loop has no actor who can unilaterally stop it.
Single-cause framings generate policy proposals (cut loans, cap tuition, forgive debt) that intervene in one loop while leaving the others running. The gap matters because piecemeal interventions either fail or shift costs rather than reducing them — understanding the system as a whole is prerequisite to designing interventions that don't create new spirals.
