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Economy for quite some years has been erratic both in America and elsewhere in the world. Other than the economy, the next most popularly discussed topic is the rising college tuition. Students, parents, Occupy Wall Street protestors and GOP debators cringe at the ever rising tuition costs.

When you look close, you find that just as with all other services and goods that are overvalued, college cost increase is also because of our government. Today our country faces one trillion dollar student debts. Over the past ten years, there has been a 139 percent increase in federal student loans and 428 percent increase in four year public colleges since 1990.

Recently President Obama has announced a plan in an effort to relieve many students across the country from heavy burden of student loan that always comes attached to the college education. All the federal aid subsidies and programs resemble the housing bubble with eerie similarities. 

In the housing market, the boom was created by artificial lowering of interest rates. This in turn led to malinvestment and eventual downfall. The same thing is now happening to college tuition. Demand for higher education will be fueled by cheap credit. It is very dangerous to subsidize college education and bailing out students and passing on the burden to taxpayers.

Tinkering with the mechanisms of the market to provide incentives is not going to solve the problem. If the federal government keeps providing loans and bailing out students from loans, colleges do not have any incentive to keep costs under control.

We will only end up pumping up an unsustainable bubble through malinvestment if college education continues to be financed by the government. Effect of federal tuition aid programs can be felt at every level including wait-staff and parking lot attendants. There is clearly no improvement in quality of education in keeping with the rising cost.

At the end of the day, Obama administration must ask a few relevant questions such as whether it is worth spending billions of dollars in federal loans, grants and aid packages, all of which is taxpayer money only to further fuel already skyrocketing tuition. To intervene in the market and increase demand for higher education through federal student aid is to directly help speed up rise in tuition cost.

Obama may inadvertently be adding more fuel to fire in his efforts to quell college costs by proposing for larger financial aid programs and more Pell Grants. Need of the hour is to free up the market as this is the only way to make college truly affordable and accessible to all. Make the environment more competitive to improve quality and drive prices down.

There is no doubt our central planners have noble intentions. Nation definitely benefits from investment in human capital. Incentives however are changed for the worse if the supply stays rigid and demand is raised artificially. It is time for our policymakers to realize that a bust is on its way putting an end to the higher education boom.