U.S. colleges cash in on foreign students

Beaumont Tower, Michigan State University
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Beaumont Tower, Michigan State University

You've read all the stories about the out-of-control rising cost of college tuition. You've heard about the $1 trillion in student loan debt. You might even know that some politicians are trying to force colleges to do something about those ballooning prices and debts. But maybe you don't know that most of America's elite colleges have more than a few back-up plans already in place just in case the tuition bubble bursts and the politicians come knocking down their doors.

The first back-up plan is the most obvious and easiest to implement: just keep raising tuition. The logic behind this tactic is pretty simple. The more you raise the base price of tuition, the more money you'll have in reserve so you can lower the prices when political or economic pressures might force you to do so. Also, a jacked up tuition sticker price allows schools to claim they're offering millions more in financial aid even when the percentage of tuition reduced is still the same and the total revenue gets higher. Genius!

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The most elite colleges like Harvard and Princeton have been using an even better back-up plan. Because so many rich people the world over are willing to pay any price to get their kids into those schools, undergraduate tuition is made free or almost free for students from families making less than a certain income level. That's even though the cutoff income level could actually could be considered upper middle class in many parts of this country. This is all possible because the super rich students' parents are more than willing to pay the full and over-inflated tuition price. Now, these schools look like they're making some kind of sacrifice even as their tuition revenues and endowments grow. With $0 tuition costs even for some families who make more than $100,000 per year in some cases, how can college tuition inflation opponents like Senator Charles Grassley ever hope to make his case against the Harvards of this country? Even more genius!

But you don't have to be an elite Ivy school to take part in the third and hottest new American college tuition bubble insurance plan: enroll more foreign students! This plan works a lot like the Ivy League "soak the eager rich" method, but without the nice no-cost tuition angle for everyone else. As the Wall Street Journal pointed out today, a new government report shows the number of foreign undergraduate students enrolled in U.S. colleges is at an all-time high of 1.13 million. That's 14% more than last year and 50% more since just 2008. The reason is simple: the foreign students pay full price. For a public state school in places like Colorado, the difference between a full-paying out of state student and one from in-state is more than 450%.

That's no chump change, and one has to wonder if the big dollar signs have clouded some college administrators' minds like the Cornell dean recently caught in an undercover sting video saying he'd welcome ISIS on his campus. We can almost excuse him, because maybe he thought ISIS would use its oil and slave trading money to pay Cornell's $48,900 annual undergrad tuition?

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But seriously folks, hosting foreign students is certainly not a bad thing in principle. When non-Americans stream into our even non-elite colleges for instruction in key skills like the hard sciences, it's a great sign that our educators are still doing something right. And the cultural lessons our students and professors can learn from foreign counterparts are many.

But let's be honest. Money is the #1 reason why foreign student enrollment is soaring. Foreign students are American higher education's hedge against the growing chance that federally-backed student loans won't just continue to be there at any cost. They're the hedge against the possible consumer backlash as a growing number of college grads are unable to find jobs that pay enough to repay those student loans.

In the meantime, our colleges will just keep soaking everyone here and abroad for as long as they can.

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