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Can't pay your tuition? Blame Uncle Sam

Have you ever asked a college or grad-school administrator why they charge so much for tuition?

They usually come back with the following answer: "You can't put a price on a quality education," to which I often reply, "but you just did — and it's $65,000 a year!"

So seriously, why do colleges and grad schools charge so much?

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People walk on the Columbia University campus on July 1, 2013 in New York City.
Getty Images
People walk on the Columbia University campus on July 1, 2013 in New York City.

Because they can, thanks to Uncle Sam.

But it looks like even Uncle Sam is finally figuring this out.

Many of us have heard the reports saying the total amount owed in student loans is now more than $1 trillion.

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And the Obama administration is becoming concerned about too many people taking advantage of its student-loan-forgiveness programs. Enrollment in those plans has surged by 40 percent over the last six months. Now, 1.3 million Americans owe a total of about $72 billion! The result is that the administration is planning to cap the debt eligible for forgiveness at $57,500.

But the real headline is that the White House is also realizing that these forgiveness programs are, flat out encouraging and enabling colleges and universities to jack up tuition. Federal data show tuition has gone up at a rate 2 ½ times the rate of inflation since 2004 alone.

In addition to the push to cap the forgiveness programs, Deputy U.S. Treasury Sarah Bloom Raskin said the administration is generally concerned about the entire student-loan-debt problemand is looking into the many ways it is adversely affecting our economy.

Congratulations, Washington. Welcome to a reality that's been out there for seven decades.

Because tuition inflation isn't anything new — and it's certainly didn't start a decade ago or with any Obama administration forgiveness plan.

But it did start with the government.

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The fact is, ever since the government got into the student- loan and student-loan-guarantee business, educational institutions have gamed the system to the tune of trillions of dollars in profits. As is the case whenever the government gets involved in everything from food to health care, prices and costs go up — not down.

Universities aren't stupid. They've known that they could make out like bandits from that first day in the 1950's when the U.S. government began offering loans solely to students in engineering, science and education.

It was a simple case of supply and demand; the availability of government loans increased the demand for higher education as fewer Americans had to make a choice between going to work right after high school or getting a college degree. The schools knew this was a viable business plan based on the huge expansion they'd experienced after World War II when millions of returning soldiers poured into colleges on the G.I. Bill. So the schools raised tuition accordingly.

The tuition gorge fest has continued unabated since then, as the government student-loan programs were made available to every matriculating student. And even though the government is only backstopping loans since 2010, tuition is rising at the same old healthy pace.

Many argue that all of these costs are still worth it. They point to a new study out this week that shows that people who don't get at least a college degree miss out on an average $800,000 in earnings over their lifetimes. And that argument has been a good one for a long time.

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But the argument is getting weaker as we see the way student-loan debt is starting to dent the economy and change our entire culture. Several experts believe the crucial first-time-homebuyer market is suffering mightily because so many 20 and 30-somethings are too straddled with student-loan debt. And a recent report by the Brookings Institution citing an all-time low in American entrepreneurship also suggests that young people who could be starting companies are opting to stay in salaried jobs in order to keep up with their loan payments.

Then there's the growing number of new and old economy jobs, from computer programming to natural gas drilling, that don't require a traditional four-year college or grad school education.

No matter how good the American higher-education product is, the Obama administration is starting to feel the sticker shock that parents have been feeling for decades.

And that means the party is almost over.

Commentary by Jake Novak, supervising producer of "Street Signs." Follow him on Twitter @jakejakeny.