Posted: December 7th, 2014

Potential Oligopolistic Cartels among Higher Education Institutions: Are Higher Education Institutions Taking Advantage of the Government and Parents/Guardians to Increase tuition?

Economics of Higher Education
Potential Oligopolistic Cartels among Higher Education Institutions: Are Higher Education Institutions Taking Advantage of the Government and Parents/Guardians to Increase tuition?
(A case Study of the of State New York)
Client’s Name
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Abstract
In the contemporary society, higher education has become one of the biggest drivers of the economy and determinant of the potential earnings of an individual. For this reason, its importance has been hyped and its demand has increased rapidly. However, as the demand rises, so does the cost of accessing higher education. Trends show the tuition fees have increased rapidly in the past decade and they keep rising. This has made the major stakeholders who pay tuition to wonder whether they are being exploited by the higher education institutions. To determine this, the study gathered utilized the state of New York as the case study area. Data on inflation, state financial aid, and enrollment information was gathered from NYSED. This data was used to answer three questions, which contribute greatly in determining whether the higher education institutions are taking advantage of the situation to increase tuition. The questions were:
•    Is the state of New York prepared for the rising tuition trends of higher education?
•    Does the state of New York allocate the financial aid based on the observed inflation rate?
•    Does a relationship exist between the tuition paid and the inflation rate in the US?
The results showed that that the state was fairly well prepared to handle enrollment between 2001 and 2010. Additionally, the financial aid was had a negative correlation to the inflation rate. This implies that financial aid and inflation are inversely related. Lastly, results showed that the instate tuition had a fairly strong correlation with the inflation rates while the outstate tuition was uncorrelated to the inflation rates.
With these results, it became increasingly clear that the higher education institutions could not blame the tuition increase on state’s lack of preparation or inflation. As a result, the flagship universities and other highly rated institutions were potentially behaving like oligopolistic cartels and hiking the fee for profits and wealth gains. Haycock et al. (2010) insinuated that the priorities of the higher education institutions are skewed and the tuition hike, which was meant to aid the poor, was channeled to the rich and middle class citizens, who could afford to pay tuition.
Contents
Abstract    2
Introduction    4
Background    4
Aim and Study Questions    6
Significance of the Study    7
Literature Review    7
Current Trends in Higher Education    7
Perspective of Higher Education Administrators    9
Is the Perspective of the administrators True?    9
Potential Oligopolistic Cartels behavior    10
Data    11
Research Design    12
Theoretical Framework    12
Empirical Framework    13
Results, Interpretation and Discussion    15
The State’s level of Preparation    15
Is the Allocation of financial aid based on Inflation?    17
Does a relationship exist between the tuition paid and the inflation rate in the US?    19
Discussion    22
Limitation    25
Conclusion    25

Economics of Higher Education
Introduction
Higher education is one of the most valuable mechanisms for individual development, societal advancement, and economic growth in the contemporary global society. A properly educated labor force is essential for the future growth and development of the different economic units in the world. With the rapid technological development coupled with the incursion of information and communication technology (ICT) into the business world, competition among the different industries has risen rapidly. Torero (2006) in his book intimates that the current development in technology has increased the level of competition in all aspects of societal life, including businesses, governments, and education system. As a result, companies, governments, and non-governmental institutions are in constant need of professional, highly skilled laborers, who can assist them, achieve their goals and objectives.   Higher education is attempting to ensure that this is possible by educating the people in a variety of disciplines and concepts.
Background
In the United States, a complex network of private and public participants acts collaboratively, under constitutional guidance, to provide higher educations to the different types of individuals who require specific knowledge and skills. With the increasing demands for knowledgeable and skilled laborers in the country, President Obama supported the idea of raising the amount of Pell grant to ensure that students had the best opportunity of getting into higher education institutions. In addition to this, the governments have flirted with the idea of expanding income-based repayment strategy for student loans and freezing the interest rates on subsidized loans to encourage borrowing and reduce the burden that students have after school (Department of the Treasury and Department Of Education, 2012; Li, 2013a). The availability of financial aid from the government together with the high demands of skilled workers has increased the demand for college education. This has in turn led to an annual increase in the number of enrollments in higher education institutions.
Possessing a higher education diploma has become a significant determinant of a laborer’s wage rate or salary in the United States. According to a report by the Department of the Treasury and Department Of Education (2012), the average earnings of a college graduate are 50% higher than that of a high school graduate. This earning figure had increased by 2008 and a graduate earned almost twice as much as a holder of high school diploma. For such a reason, the number of enrollments in higher education has been increasing annually. According to reports in the NYSED database, the total number of undergraduate enrollment in the state of New York was 848,214 in 2001. After a decade, this figure had risen to 1,020,486.The annual increase in the number of enrollments has been accompanied by an increase in the tuition.
From the outset of things, it is obvious that Americans are attempting to improve their lives through education. However, it is also worrying when one takes a critical look at the cost of accessing higher education. Dylan Matthews (2013a), in his 10-part series of articles that discuss the cost of higher education, asserts that the cost of college has ‘skyrocketed’ in the past few decades. In his argument, Matthews compares the $322 his mother paid for college in 1975 and his own senior-year tuition cost of $ 36305 to show the rapid increase in college fee. Within a period of just over three and a half decades, the tuition fee for a college senior had increased by approximately10000%, which is an extremely large figure considering that the average household income in the United States had not increased significantly in the same period (Short, 2014).
In New York, the major stakeholders, who pay for the higher education tuition (the parents/guardians and the state of New York) are always vigilant on the dynamics of higher education tuition.  Like every other state in the country, the state of New York experiences annual increase in tuition fees, and the parents/ guardians together with State are required to be ready to meet these tuition demands. Despite the high tuition demands, the number of enrollments in the state keeps.  Based on a decade of statistics, from the 2001 to 2010, the number of enrollments in all colleges and universities, of New York, had increased by an incredible 16.90% despite the increase in fees (NYSED 2014a). This mildly implies that the guardians/parents and state of New York are ready for the rising costs of tuition.
The rapid rise of  higher education is disconcerting. Parents and the State are worried that tuition is becoming very expensive and unpredictable. Currently, preparation entails factoring in several economic aspects, such as inflation, interest rates, and, as of 2008, the concept of financial crises complicated the issue. This begs the question: just how prepared are the parents/guardians and the state of New York in dealing with the progressive demands of the higher education tuition? The majority of the statistics and literature indicate that these two stakeholders are well prepared for the demands of higher education (Dembo and Seli, 2012, McCormack, 2004; Romer and Wolfers, 2010). Parents are increasingly preparing for college by setting aside college/university funds for their children at an early age (US Congress, 2006). On the other hand, the state sets aside budgetary allocations for higher education based on the expected enrollment statistics coupled with other important economic considerations such as inflation, tax rate, and interest rates. With such forward thinking habits of the major stakeholders, it seems that the administrators of the higher education institutions are taking advantage of the situation to increase their profits and wealth.
Aim and Study Questions
Education is an essential part of the modern society. Different researches indicate that education is a major contributor to the difference in income levels observed among the individuals in the United States and many other regions in the world (Adunga, 2013; Treasury and Department of Education 2012). With the justified hype surrounding education, the state, and parents are increasingly paying higher tuition fees (Li, 2013b). Higher education tuition has increased rampantly, but the enrollment rates keep increasing. This has prompted many people to wonder whether the higher education institutions, especially flagship institutions, are adopting an oligopolistic mentality and potentially forming cartels in order to control tuition costs, as they see fit. With regards to this, the study main aim was to determine whether the higher education institutions in the state of New York are taking advantage of the high demand for education, coupled with the state and guardian’s competent levels of preparations to increase the tuition. To achieve this, the study had to answer the following questions
1.    Is the state of New York prepared for the rising tuition trends of higher education?
2.    Does the state of New York allocate the financial aid based on the observed inflation rate?
3.    Does a relationship exist between the tuition paid and the inflation rate in the US?
Significance of the Study
The results of this study shall be beneficial to the educators, guardians/parents, and the state of New York and the United States when assessing and seeking to curb the rising cost of tuition. In addition to this, the study form a foundation that future researchers can use to determine the best way to reduce the potential formation of oligopolistic cartels among higher education institutions in the United States.
Literature Review
In the contemporary American society, the general understanding among most people is that the rules of the education and employment in the global scene are changing. People in different regions of the world are getting a better education in order to get jobs from any place in the globe. In fact, in the past few decades, countries like South Korea, Czech Republic, and Hungary have produced more graduates than America (Stewart, 2012). Internationalization has changed the rules completely. People can work from any station in the world, as long as they possess the necessary skills and education. Today, the once popular tradition of sticking with a single job for life is no longer an attractive choice. People have the liberty to work in six or seven different jobs (Gerald and Haycock, 2006). However, for such a dream to be possible, they require a proper education.
Current Trends in Higher Education
The Federal government has recognized the need for education and they are stepping to the challenge by providing funds for students. According to a report by The White House (2013):
“The President raised the maximum Pell Grant award to $5,730 for the 2014-15 award year — a nearly $1,000 increase since 2008. Under the President’s leadership, the number of Pell Grant recipients has expanded by 50 percent over that same time, providing college access to millions of additional low-income and middle-class students across the country.”
The Federal government has responded to the global shifts of education and employment trends by increasing the funding and attempting to emphasize on the importance of post-secondary education (Board of Regents 2012; Evers, 2012). In addition to this, high schools are working harder to prepare the majority of the students for higher education (National High School Center, 2008). Fervent efforts have been put in place to even ensure that the poor students get high school and college education. Fortunately, the government is not the only stakeholder that is responding to the changes. Guardians/parents and students are equally responsive to the campaigns that intend to improve the education levels of the Americans. According to a report by the US congress (2006), guardians in America have emphasized on the value of higher education by setting aside college funds and provisions that can assist children get better education. Students have also been very responsive. Gerald and Haycock (2006) assert that: “More and more students are completing advanced college preparatory courses and college aspirations are rising steadily”
However, as the dynamics of education in the world changes and different nations progress in the field of education, the American people are growing increasingly uncomfortable by the trends exhibited in the higher education sector. Higher education institutions, especially the flagship universities, charge higher tuition fees and turn poor students from low-income households away. In an article by Weissmann (2014), he states that George Washington University, one of the most expensive colleges in the United States, rejected students because they were poor and could not afford to pay for tuition. This is one of the institutions trusted with the task of imparting knowledge, and producing the best business, political, and civil leaders of America. It is disheartening, to learn that some of the best schools are refusing to provide one of the most basic modern commodities (education) to poor students.
Public universities in the United States, especially flagships universities, have broken the sacred rule of providing education to all students, irrespective of their social background, race, or income and they are currently focused on the relentless pursuit of profits and wealth by being selective. According to Gerald and Haycock (2006), the yardstick for measuring the achievement of public universities has changed greatly. Today, universities are not defined by what they accomplish with their students, but rather with the number of students, they keep out. The number of minorities and low-income earners are diminishing. As pointed by Weisssman (2014) admission is dependent on whether students can afford fees or not.
Perspective of Higher Education Administrators
As the tuition keeps rising annually, stakeholders have come up with questions about the viability of the increases. When asked about the constant increase intuition, higher education administrators have blamed every other stakeholder and economic factors, apart from themselves. Blames range from, insufficient financial aid from the federal government and the respective state government, poor preparation at the high school level, to unavoidable economic events (Feldman, 2012; Ginsberg, 2011; Rostan and Vaira, 2012).  One of the most common reasons for the increase in tuition fees has been the rate of inflation. Universities are constantly adjusting their tuition and claiming that the rate of inflation is a major causative for the adjustments.
Is the Perspective of the administrators True?
According to Matthew (2013a), “some experts think that the adjustment lets colleges off the hook — after all, the rising price of college tuition is itself a significant driver of inflation”. It is relatively obvious that universities play a major role in the rise of tuition fees. It is true that, in some occasions, the federal government and the coinciding state governments have failed to provide the necessary funding to support higher education. Nevertheless, the higher education institutions in the country have also failed poorly in their mission. Most universities are focusing on the accumulation of wealth and profits. Most of this wealth is gained through the frequent increase in tuition, which they claim would be used for student financial aid. The proportion of the wealth spent on student financial aid actually dwarfs the amount of money universities receive by charging higher tuition.
Flagship universities in the country have often justified the increase of fees using the concept of inflation and the idea of providing financial aid to poor students. Additionally, they have unrestrained discretion to decide the beneficiaries of the financial aid. The majority of American society expects this aid to go to students who need it or students whose annual income is extremely low. However, Marcus (2014) insinuates that the financial aid offered by universities no longer benefits the needy, but rich.
Potential Oligopolistic Cartels
Despite the high increase of tuition, the demand for higher education is increasing annually. As the country embraces education, and learns of its value, people are increasingly trying to get to college. For the majority of these people attending, the cost of tuition and other college expenses often leave them worse off than they were. As a result, a select few still ask whether it is worth attending college or not. Matthew (2013b) provides a simple answer to this question: Yes, he says. The author intimates that college enables people to earn more. In addition to this, Matthew states higher education is generally a contributor to the salary differential observed among various individuals. For this reason, the demand for higher education has increased rapidly. Americans are willing to improve their lives with education, as the main tool. This rapid increase in enrollment has been one of the main reasons for the rapid increase in tuition. According to Matthews (2013c), higher education institutes are constantly increasing their fees to cater for the increase in number of students. For instance, the schools would have to build newer classes, amenities, or sports arenas. In addition to this, the author implies that these institutions may be forced to raise their fees if the federal government or the coinciding state government reduces the amount of subsidy offered to the schools.
In spite of Matthew’s logic, other scholars intimate that higher educations may not be justified in raising their tuitions (Gerald and Haycock, 2006; Haycock et al., 2010). These scholars believe that higher education institutions are purposefully becoming more selective in the enrollment activities. They are only choosing a select few, who can afford the tuition demands. Basing this with the economics of markets, it is becoming evident that higher education institutions are behaving more like oligopolies that have formed cartels. There is an unspoken agreement among higher education institutions to increase the fees and limit the quantities of students attending college through selectivity. This proves that there is potential cartelism among the exclusive universities in the United States. According to Roger (2010), cartelism in an oligopolistic market can lead to price exploitation and sacrificial of quantity in order to  maximize profits by increasing prices and reducing the quantity.
Similarly, as the higher education institution, especially flagship universities, become more selective and increase the cost of tuition, it becomes evident that they are adopting oligopolistic cartel-like behaviors. Currently, most of the flagship universities and the other highly ranked universities institutions have explicitly prioritized price (tuition), just as an oligopolistic market with cartels would. In addition to this, the universities have attempted to become sacrifice quantity by being extremely selective in the enrollment process. Gerald and Haycock (2006) supported this statement when they stated:
“Over time, however, that compact has been broken, and in its place has come something quite different: the relentless pursuit not of expanded opportunity, but of increased selectivity. Rated less for what they accomplish with the students they let in than by how many students they keep out, many of these flagship institutions have become more and more enclaves for the most privileged of their state’s young people.”
Data
The research mainly utilized secondary data. A decade worth of data (ranging between 2001 and 2010) was gathered from the New York State Education Department (NYSED) website. To begin with, data on the financial aid offered by the state of New York was gathered in order to determine the trends associated with government financial aid between 2001 and 2010. Secondly, data on tuition charges between 2001 and 2010 was gathered to show the dynamic trend of tuition in the state of New York.  Data showing enrollment trends accompanied this data to ensure that the researcher could determine how tuition, enrollment, and financial aid changed over time.
In addition to this, data on inflation rate was obtained from the US inflation Calculator (2014) website. The purpose of this data was to determine how the rate of inflation influenced the other variables such as tuition, and the financial aid. Data on inflation rates was particularly special because it has been described as one of the most influential drivers of the rising tuition and decreasing financial aid in the US (Kurtzleben, 2013; Matthew, 2013a; Odland, 2012). The tables below show the data gathered and used in the research.
Table Showing the Total Financial Aid Received by New York Colleges & Universities, and the Inflation rate between 2001 and 2010
Year    Grants (in millions)    Loans (in millions)    Work (in Millions)    Total financial aid (in Millions)    Inflation rate (%)
2001    1594.9    271.5    66.5    1932.9    2.8
2002    1749.2    363.4    71.1    2183.7    1.6
2003    1882.8    450.6    71.4    2404.8    2.3
2004    2054.1    645.3    73    2772.4    2.7
2005    2248.1    726.1    68.3    3042.5    3.4
2006    2444.6    812.5    76.7    3333.8    3.2
2007    2661.1    850.6    75.8    3587.5    2.8
2008    2995.3    759.2    79.8    3834.3    3.8
2009    6017.6    4196.4    98.5    10312.5    -0.4
2010    6479.4    4402.8    100.2    10982.4    1.6

Data obtained from NYSED (2014b): HEDSLive Trend Tracker: Financial Aid.

Table showing the Tuition Paid and the Total Undergraduate Enrollment in Ney York Colleges and Universities between 2001 and 2010
Year    In-State tuition    Out-State tuition    Undergrad enrollment
2001    9,996    11,915    848,214
2002    10,399    12,362    878,927
2003    11,177    13,534    891,120
2004    11,743    14,224    910,998
2005    12,411    14,913    918,097
2006    13,050    15,509    926,910
2007    13,571    16,162    937,416
2008    14,191    16,783    959,736
2009    14,510    17,567    1,004,861
2010    15,056    18,267    1,020,486
Data obtained from NYSED (2014a): HEDSLive Trend Tracker: New York State Total Trend Reports,
Research Design
Theoretical Framework
The paper attempts to determine if potential oligopolistic cartels are forming among higher education institutions in the United States and taking advantage of the preparations laid by the parents and the state to hike tuition. In regard to this, the study had to first determine whether the state prepared to the changes in enrollment and inflation.  Additionally, the paper observed how inflation affected the rate of tuition change and the rate of change of government’s financial aid.  For such, the study chose the state of New York as the study subject and utilized the results to explain the nationwide trends. It is expected that inflation should have an effect on the tuition and the financial aid offered. This effect will be used to explain if the higher education institutions are taking advantage or not.
Summarized Pictorial Representation of the Theoretical Framework

Empirical Framework
The study adopted a quantitative design. Creswell (2014) insinuates that quantitative design provides the best tools for examining trends and relationship. The paper’s intention was to determine tuition, enrollment, and financial aid trends in New York. Additionally, the paper intended to determine the relationship between tuition changes and the rate of inflation, the relation between financial aid and enrollment, and the relation between changes in the financial aid and the rate of inflation. For, such, quantitative research design provided a perfect platform to determine the trends and relationships between these variables.
To know the trends, the researcher utilized statistical package Microsoft Excel to plot a line graph of the annual rate of change in the financial aid, instate, & outstate tuition, and inflation. On the other hand, Correlation was used to determine the relationships. For correlation statistics between the enrollment and the financial aid, the independent variable was the financial aid and the depended variable was the total annual enrollment. Calculation of correlation coefficient between the rate of change of the financial aid and the rate of inflation, considered the rate of inflation as the independent variable and the rate of change of the financial aid as the dependent variable. Similarly, the rate of inflation was considered the independent variable, while the rate of change of tuition was taken as the dependent variable for correlation calculation between these two variables. The expected results from the correlation calculations were positive, negative, or zero correlation.
Results, Interpretation and Discussion
The State’s level of Preparation

Description
The plot above was used to compare how the rates of inflation, tuition, and the financial aid changed between the year 2001 and 2010. From the graph, it is evident that the both the tuition, and the government financial aid changed at a considerably higher rate than the rate of inflation for majority of the time. Between 2002 and 2007, the rate of change of the tuition paid was higher than the rate of inflation. However, between the year 2007 and 2008, the rate of change in tuition coincided with the rate of inflation. However, the trend reverted to higher rate of tuition changes than the rate of inflation between 2009 and 2010. All through the years, the rate of change of the financial aid, offered by the state of New York, was higher than the rate of change in tuition and the rate of inflation.

Correlation Coefficient = 0.904224729
An analysis using a correlation scatter graph, to determine how the state’s financial aid was related to the enrollment rates, yielded a trend line that showed a very high correlation between the government’s financial aid and the enrollment numbers. The correlation coefficient between the two variables was 0.904, which implies a strong correlation between the government financial aid and the enrollment rates
Analysis/Interpretation
From the description of the statistics, readers note that the rate of change of the government’s financial aid was higher than the rate of change of tuition and the rate of change of inflation. While keeping other economic factors constant, this implies that the New York state government adjusted its financial aid to meet the tuition and inflation needs. With regards to this, one notes that the state government of New York had always been well prepared to meet the inflation and tuition demands between the years 2001 and 2010. In addition to this, the increase in financial aid was met by an increase in the number of enrollments. The strong correlation between government financial aid and tuition meant that the number of students enrolled in New York’s higher education institution highly depended on the government’s financial aid. Considering that, there was a considerable rise in the number of enrollments between 2001 and 2010; readers can assume that the government’s level of preparation was good.
Is the Allocation of financial aid based on Inflation?
Table showing Correlation Calculations between Inflation rate and
Inflation rate (%)    Rate of change of the financial aid
2.8
1.6    11.48509411
2.3    9.194111776
2.7    13.25926995
3.4    8.87756779
3.2    8.737776711
2.8    7.071777003
3.8    6.436637717
-0.4    62.81890909
1.6    6.099759615

Correlation coefficient    -0.814879916

Description
From the table and graph above, we note that there is a strong negative correlation between the rate of inflation and the rate of change in the financial aid offered by the state government of New York. The co-efficient figure of approximately -0.815 intimates that the higher the rate of inflation the lower the rate of change in financial aid provided. For this, reason the trend line slopes from left to right downwards.
Analysis and interpretation
The strong negative correlation coefficient indicates that the government rate of financial aid allocation is inversely affected by the rate of inflation in the economy. Higher rates of inflation would lead to lower rates of change in the financial aid allocated. For instance, in 2009, when the United States, had a negative rate of inflation, the rate of change of financial aid in the New York increased by a whopping 62%. However, a 2% rise in the rate of inflation in 2010 forced the rate of financial aid allocation to drop by over 56%. These two points do not provide the general trend, but serve to show that an increase in the rate of inflation inversely affects the rate of change of the financial aid offered by the state.
Does a relationship exist between the tuition paid and the inflation rate in the US?
Table Showing Calculated Correlation Coefficient between the Instate and Outstate Tuition Paid
Inflation rate (%)    Rate of instate tuition change (%)    Rate of Out-State Tuition Change (%)
2.8
1.6    3.875372632    3.615919754
2.3    6.960722913    8.659671937
2.7    4.819892702    4.85095613
3.4    5.382322134    4.620130088
3.2    4.896551724    3.842929912
2.8    3.839068602    4.040341542
3.8    4.368966246    3.700172794
-0.4    2.198483804    4.462913417
1.6    3.626461211    3.83204686

Correlation coefficient    0.610638711    -0.037433003

Description
From the table, the correlation coefficient between the instate tuition changes and inflation rate shows that there is a fairly strong relationship between the annual rate of increase of instate tuition and the inflation rate. The trend line for this correlation slopes from right to left to right upwards, thus implying a positive correlation. On the other hand, there is no significant relationship between the annual increases in Outstate tuition rates and the rate of inflation. The correlation coefficient of -0.037 between the annual inflation rate and the annual change in of instate tuition justifies this concept. The trend line forms an almost perfectly elastic curve.
Analysis/Interpretation
The rate of inflation has a fairly positive effect on the annual change of instate tuition. Mathematically, the inflation rate is directly proportional to the rate of change in tuition. This implies the increase observed in the annual tuition fees is based on the changes of the inflation rate to a given extent. However, the inflation rates seem to have an insignificant effect on the changes observed in Outstate tuitions charged by higher education institutes in New York. This means the rate of outstate tuition changes are uncorrelated to the rate of inflation. These two variables are independent of one another.
Discussion
A summary of the results shows that the state of New York is fairly well prepared to handle the increasing enrollment pressure. However, the rate of inflation affects has an inverse effect on the amount rate of change of the financial aid. Nevertheless, this does not imply that the state decrease the amount of financial aid. Instead, it means that the ratio of change in the financial aid is lower during periods of higher inflation. As a result, it does not discredit the state level of preparation. Apart from this, the results also show that the rate of instate tuition is affected by the rate of inflation, whereas the rate of Outstate tuition change has an insignificant relation to the rate of inflation. Having, statistically, answered all the research question, it is imperative that the paper associates the research questions with the focus of the paper. For such, the study utilizes the statistical analyses coupled with literature from other scholars to determine whether universities are exhibiting oligopolistic cartel behaviors and taking advantage of the guardians and the state’s preparation to hike tuition fees.
The correlation coefficient between the inflation rate and the average annual change in tuition indicates that inflation cannot account for the observed rate of change in tuition.  As such, one begins to wonder what other factors could account for this rapid increase in tuition. According to Matthews (2013c) a reduction in the level of government financial aid coupled with the increased demands for resources due to increase in number of enrollment accounts for the higher tuition. A number of other scholars have also pointed out that the state provides insufficient financial aid for higher education (Ebersole and Patrick, 2011; Longanecker, 2006).  Despite Matthews (2013c) attempt to explain the rapid increase in tuition, the author, Matthew, 2013b, in his earlier work indicates that experts are of the opinion that the inflation adjustment and other justifications for tuition increment lets colleges off the hook. After all these experts think that, the high tuition fee is one of the major contributors of inflation in the US. Additionally, this study’s financial aid statistics for the State of New York indicate that, between 2001 and 2010, the state might have been well prepared for the enrollment increase and provided sufficient aid to match the enrollment increase. For this, reason, one begins to wonder whether the rise in tuition among higher education institution is really warranted.
With both the statistics in this paper and the literature from scholars like Matthew (2013b) casting doubt on the viability of tuition increase, it is clearly evident that administrators of higher education institutions might be taking advantage of the state and the parent’s preparation to hike tuition. Many scholars have highlighted the importance of higher education (Lumina Foundation for Education, 2002; US Department of Education, 2012; Northeastern University, 2013). Evidence also suggests that Americans with better education have a higher earning power than their counterparts with poor education have (Krantz and Smith, 2011; Renshon, 2001). The justified hype surrounding higher education has made it a very desirable commodity. Additionally, the utility derived from the commodity is so high that more and more people are willing to pay for higher education, irrespective of the tuition charges.
Higher education institutions are aware of the desirability of education. They are also aware that the state and the guardians are usually prepared to pay for the cost of education. As a result, they have been hiking the fees over the years in order to receive more income and profits. This is especially true for private institutions, whose main aim is to make profits. However, public flagships and other public higher education institutions in the United States are also increasing their tuition. Flagship universities in the United States know that they are very desirable institutes. Over the years, these institutes have developed a brand well known for their reputation for producing quality. For this reason, these flagship institutions are currently selling their brand and this brand is only being sold to those who can afford it.
The concept of selectivity has also popularized among the flagship universities to accompany the rapid increase in tuition. The universities are becoming more selective in their enrollment strategies.  Richer students get preferential treatment. Gerald and Haycock (2006), explained that “Even as the number of low-income and minority high school graduates in their states grows, often by leaps and bounds, these institutions are becoming disproportionately whiter and richer”. In addition to this, stories emerging that George Washington University rejected students because they were poor (Weissmann, 2014), only served to compound the fact that higher education institutions are adopting new enrollment strategies, which  may lead to a division in the education market.
As time passes by, the flagship universities together with some of the highly rated universities are increasingly behaving like oligopolistic cartels. These institutions know that they have a good and a very desirable brand name. The demand for their product (education) is extremely high. As a result, they are using this demand to exploit the parents/ guardians and the state. After all, if a person is unwilling to pay, thousands of other people are willing and able to pay. Smock et al (2007) is of the opinion that, if the demand remains high the price of the commodity will increase exponentially to a point where only a given quantity of consumers can afford it. Similarly, if the cost of tuition remains unchecked, attending higher education may soon be a commodity that a few people can afford. Soon the education market may have a few well-known universities dominating the market and charging exuberant tuition, while other less desirable institutions try to keep up with them.  This may be the beginning of a true oligopolistic market in the education sector. However, instead of price wars, which may benefit the consumers (students), the constant, but silent agreement among the flagship higher education institutions to raise tuition, may just be pointing to cartelism.
It is true that the budget allocation from the government may be decreasing (Matthew 2013d). However, with the amount of tuition charged and the subsidies received by higher education institutions, more poor students should be able to get financial aid. This is, however, not the case as public flagship universities and other higher education institutions continue having skewed priorities and accumulating wealth (Haycock et al., 2010). These upcoming oligopolistic cartels among high education institutions, if left unchecked, are likely to continue taking advantage of parents/guardians, the state government, and even the federal government. Universities have taken advantage on the state’s ability to provide loans, grants, and subsidies, and are raising their tuition because they know students can afford it (Matthew, 2013g). Despite making a lot of money from the tuition hikes, higher education institutions have no reason to rein spending. According to Matthew (2013f) “If they raise more than they need for educational objectives, they will spend it on non-educational uses like climbing walls and nicer buildings”. The only way to correct this behavior is to for the government to intervene and create policies that would curb the rampart rise in tuition. All increase in tuition must be justified and accounted for. Financial aid should be provided to those who need it rather than the rich who can afford to pay for tuition. If proper measures are taken, the foreseen increase in tuition may reduce and gradually peter out.
Limitation
The study focuses on inflation as the major driver of tuition hike. For this reason, the results obtained are only based on statistics related to inflation. Besides inflation, several other factors play an important role in determining the tuition hike.  The factors differ from school to school, and state to state (Matthew, 2013e, Matthew 2013h). According to the author, the increased number of enrollment, economic changes, the changes in technology, and the budget cuts are among the major drivers of the increasing tuition. However, since the resources and time for the research is limited and the process of finding and analyzing such data is difficult and time consuming. With unlimited resources, a complete analysis of these factors can be done and the finding would shed light on the tuition increase in the US. Moreover, a state-by-state data analysis could be done to ensure that the factors affecting each state are recorded and dealt with if need be.
Conclusion
In the recent past, economists, scholars and the government has laid emphasis on the importance of higher education to the American public. As a result, the past few decades have overseen a rapid increase in the number of enrollments in higher education institutes. This increase has, however been accompanied, by an equally rapid in tuition, thus raising concern among the tuition payers. The study focused on determining whether the higher education institutions in the state of New York are taking advantage of the high demand, coupled with the state and guardian’s level of preparations to increase the tuition. From the results, it is plain that public flagship universities and other highly rated universities in New York and across America are behaving like oligopolistic cartels, which have an unspoken agreement to increase tuition at the expense of the government and the parents/guardians. Higher education institutions are taking advantage of the early preparation of the guardians and the state provision to increase their earnings and wealth. The consequence of this behavior has been an in the number of richer students attending colleges, while the number poor kids from low-income household drops.

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