How Federal Aid Drives Up College Tuition

How Federal Aid Drives Up College Tuition

December 09, 2011
Originally published in Minding the Campus

At Bloomberg News, Virginia Postrel writes about how federal subsidies intended to make college more affordable have instead encouraged rapidly rising tuitions, in a column entitled, "U.S. Universities Feast on Federal Student Aid." Education analyst Neal McCluskey links to four studies showing that increased government spending on student aid results in large tuition increases. As Postrel notes, talk of a "higher education bubble" is now common: "As veteran education-policy consultant Arthur M. Hauptman notes in a recent essay: 'There is a strong correlation over time between student and parent loan availability and rapidly rising tuitions. Common sense suggests that growing availability of student loans at reasonable rates has made it easier for many institutions to raise their prices, just as the mortgage interest deduction contributes to higher housing prices.'"

Subsidies for colleges also divert young people away from vocational training that receives fewer subsidies but leads to jobs with better pay and more value for America's economy. In City Journal, Joel Kotkin writes about the increasing demand (and correspondingly attractive pay) for workers in manufacturing, who often need vocational training rather than college educations. As George Leef of the Pope Center for Higher Education Policy notes, "even with politicians continuing to prattle on about how the country 'needs' more college graduates, the market is bound to lead many young people -- who until recently would have followed the herd into college -- to find vocational training programs for high-paying jobs like welding instead."

States spend billions of dollars operating colleges that are little better than diploma mills in terms of academic rigor, yet manage to graduate few of their students -- like Chicago State University, "which has just a 12.8 percent six-year graduation rate," and UT El Paso, which graduated only "1 out of 25 students in a timely manner." As state send more and more mediocre students to college, students learn less and less. "Our colleges and universities are full to the brim with students who do not really belong there, who are unprepared for college and uninterested in breaking a mental sweat." "Nearly half of the nation's undergraduates show almost no gains in learning in their first two years of college, in large part because colleges don't make academics a priority," according to a widely-publicized January report from experts like NYU's Richard Arum. "36% showed little" gain after four years. Although education spending has exploded in recent years, students "spent 50% less time studying compared with students a few decades ago, the research shows." "32% never took a course in a typical semester where they read more than 40 pages per week." As George Leef notes, "long-term average earnings for individuals with BA degrees have not risen much and in the the last few years have dipped. Also, degree holders seem to be learning less, as shown by the National Assessment of Adult Literacy."