Misdiagnosing the college affordability problem

27 02 2012

In his January State of the Union Address, President Obama pledged to make college more affordable by increasing access to student loans, boosting state contributions to schools, and controlling costs – a pledge he repeated during his recent visit to the University of Michigan.

Spendthrift Obama’s nod to cost control is certainly refreshing, if uncharacteristic. But the first part of his proposal, which focused on pumping more resources into our institutions of higher education, will undermine any attempts to tame budget bloat.

As SmartMoney notes:

If subsidies puff up buying power and shift prices higher, as economics courses teach, could federal aid for college help create an affordability problem? After all, the federal government began spending more on college aid with the Higher Education Act of 1965 and the full funding of Pell Grants in 1975. Since 1979, tuition and fees have tripled after adjusting for inflation. That’s much faster than the increase for real estate and teacher pay.

Well, duh.

That federal aid to students actually accelerates tuition’s upward cost spiral is a tough reality for education advocates to swallow. It’s easier to follow the lead of every other interest group and call for subsidies and handouts. The cause is at least more noble than underwriting yet another green energy boondoggle, even if the results are as unsustainable in the end.

Federal grants and subsidized student loans give schools the leeway needed to ratchet tuition rates up higher. This leads to calls for increasing federal grants and doubling down on subsidized loans. Pressuring states to dump more money into institutions with no ability to manage costs won’t help either.

This is a situation where being able to say told you so isn’t satisfying; it’s hard to see who comes out ahead here. It certainly isn’t the graduates now holding $1 Trillion in student loan debt, the students taking on ever more debt just to stay enrolled, or the taxpayers that may be on the hook for those federally-subsidized loans if grads can’t keep up with payments.

No, the only long-term winners are the higher ed fat cats riding high on six figure salaries while lamenting increasing costs – and the cynical politicians accelerating the problem by offering desperate students federal handouts.

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3 responses

4 04 2012
Occupy UMich: mad as hell, clueless as ever

[…] But any time I see the word “solidarity,” I know there’s trouble ahead. Occupy UMich’s righteous fury over tuition rates is used to back up some truly ludicrous policy proposals: the movement’s most explicit goal seems to be converting universities into giant co-ops, which would presumably kept afloat by the enforced generosity of taxpayers. Never mind that attempts to make higher education more accessible through grants and guaranteed loans is fueling the college affordability crisis. […]

4 04 2012
Occupy UMich: mad as hell, clueless as ever « Graham Kozak’s Blog

[…] But any time I see the word “solidarity,” I know there’s trouble ahead. Occupy UMich’s righteous fury over tuition rates is used to back up some truly ludicrous policy proposals: the movement’s most explicit goal seems to be converting universities into giant co-ops, which would presumably kept afloat by the enforced generosity of taxpayers. Never mind that attempts to make higher education more accessible through grants and guaranteed loans is fueling the college affordability crisis. […]

25 04 2012
Student loansharking « Graham Kozak’s Blog

[…] we need to stop fueling the tuition bubble through the extension of subsidized loans and grants and allow true competition to return value to higher education. Getting government out of the way […]

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