It was satisfying to watch the two Presidential candidates find their ways to absolutely opposed positions on gay marriage. Elections are supposed to present us with clear choices like that, but they usually don’t. Just two weeks earlier, on an issue that affects many more people, Barack Obama had taken a stand that he evidently thought would also showcase a sharp contrast between him and Mitt Romney. A temporary reduction in an interest rate that makes some federal student loans more affordable is due to expire on July 1st, and Obama called for its extension.

Illustration by Tom Bachtell

Republicans in Congress have fought Obama on the interest rate, saying that keeping it low would add to the federal deficit. Last month, in response, Obama delivered a rip-roaring address at the University of North Carolina, in which he mocked the Republicans for wanting to make hardworking, non-affluent students victims of their budget-cutting impulses. Just the day before, however, Romney had let it be known that he, too, is in favor of extending the rate. This was a contrast that he chose not to draw.

This graduation season, the national conversation seems to be going into apocalypse mode about the cost of higher education. Tuition has been rising faster than the inflation rate for years, even through the Great Recession. State governments are cutting funding, and thus pushing more students into the loan market. Student-loan debt is also rapidly rising. Hundreds of thousands of students start college every year, but only about three-fifths get a degree. The job market for graduates is weak. Two years ago, Steve Eisman, the investor who made a fortune shorting subprime mortgages, gave a speech, entitled “Subprime Goes to College,” in which he predicted a 2008-style meltdown at for-profit universities, driven by systemic defaults on student loans. That prediction is now being applied to traditional colleges, too. Why, then, are both candidates proposing to further inflate a bubble that’s about to burst?

There are all sorts of internal forces on campuses that drive tuition upward, but they are less important in setting the price of an education than is the conviction that college is an unbeatable investment for a better life. As Obama put it in North Carolina, “In today’s economy, there’s no greater predictor of individual success than a good education. Right now, the unemployment rate for Americans with a college degree or more is about half the national average. The incomes of folks with a college degree are twice as high as those who don’t have a high-school diploma.” These figures communicate the over-all reality of the situation better than do the anecdotes about heavily indebted graduates who can’t find jobs. And it is also true that, thanks to a widespread springtime ritual known as “discounting”—higher education’s version of airlines’ and hotels’ variable pricing, in which incoming students get grants to reduce their tuition—the actual price of higher education is less shockingly high.

Still, many programs, especially those which claim to lead to high-paying jobs, use deceptive recruiting practices that both overstate graduates’ employment prospects and understate students’ financial obligations. (Liberal-arts colleges, which stress their non-economic value, aren’t so guilty of such practices.) The Obama Administration has pushed for reform, at least in the case of for-profit universities. Yet no enterprise has an unlimited capacity to fleece consumers. If higher education is truly overpriced, its costs will go down when students and their parents stop perceiving it as being limitlessly valuable.

There is a larger issue. College costs so much because people are paying for unstated social goals. Each college and university is a collection of many different activities, some of which pay for others. Research libraries and philosophy departments can’t possibly make money; they require subsidies from business schools and biomedical-research labs, but that drives tuition higher than it would be if universities dropped their money-losing functions. More broadly, the United States created the world’s first mass system of higher education. Hundreds, not dozens, of colleges aspire to be research universities—because there lies status, prestige, and intellectual excitement—and so they have faculty members with low teaching loads. That costs money. The system is built to take in just about all high-school graduates, and that costs money, too.

Where higher education is actually underpriced is in the top-tier schools. That may sound offensive, but price is determined by what people are willing to pay, and the top twenty-five or so schools in the country could charge even more than they do. The number of applications to those schools continues to grow faster than their cost. (Ivy League colleges will charge about sixty thousand dollars next year.) That’s because the perceived value of their degrees continues to rise. Now that we know that either Obama or Romney will be President next year, we also know that, from 1989 through at least 2017, every President of the United States will have had a degree from either Harvard or Yale or, in the case of George W. Bush, both. That could be a three-decade accident, or it may be a sign of something lasting—the educational version of the inequality surge, elevating “one per cent” institutions far above the rest.

The top schools, led by Stanford, are now aggressively exploring online education, which they had previously left to the for-profits. This doesn’t mean that they will suddenly start granting degrees online to ten or a hundred times as many students; instead, they are likely to offer a second, cheaper (or even free) tier of education that will only enhance the lifelong value of their traditional, in-residence degrees.

In higher education, the United States may be on its way to becoming more like the rest of the world, with a small group of schools controlling access to life membership in the élite. And higher education is becoming more like other areas of American life, with the fortunate few institutions distancing themselves ever further from the many. All those things which commencement speakers talk about—personal growth, critical-thinking skills, intellectual exploration, breadth of learning—will survive at the top institutions, but other colleges will come under increased pressure to adopt the model of trade schools. Student loans open access to students, and give colleges more freedom. Obama and Romney will have plenty to disagree about, and it’s good that the interest rate on student loans isn’t on the list. For the federal government to pump extra tuition money into the system, in the form of low-cost loans, in order to spread opportunity more widely, and to allow more schools to provide more than skills instruction, seems like a small price to pay for the kind of society it buys. ♦