College affordability is a problem, with tuition, room & board averaging above $31,000 a year. Reason to boost government aid, as the incoming Speaker says she will? Nope: That “solution” will only make things worse. Here’s why:
Colleges charge outrageous prices knowing that Washington always deflects cost. Consider that qualified students are eligible to receive $4,050 in Pell Grants per year and up to $23,000 per undergrad degree in Stafford Loans (the two main sources of federal student aid). That means there is at least $16,200 in Pell Grants and $23,000 in federal loans currently set aside to offset costs. That’s a whole lot of green college administrators can play with—$39,200 to be exact—when calculating the sticker price. What incentives do schools have to be price-friendly and economically resourceful when the opposite behavior will multiply its piggybank? The government’s “helping hand” gives colleges a perverse market incentive to inflate costs.
Think that’s far-fetched? Consider that congressional spending for higher education jumped 686 percent between 1973 and 2005, the Office of Postsecondary Education tells us. Taxpayers shelled out $72.4 billion in 2005 compared to just $9.2 billion (in 2005 dollars) in 1973. Outlays rose 95 percent from 1995 to 2005 alone. Yet this soaring spending has not brought prices down—instead, it’s goosed them up. Tuition’s grown more than twice as fast as inflation over the last 30 years, indeed, faster than the costs of food, clothing, and shelter.
Here’s the ironic part. Whenever tuition prices climb, we don’t get angry at the ones actually jacking them up. Politicians don’t probecollege presidents over college affordability. Instead, they just whip out Uncle Sam’s (our) checkbook. What assurances have we been given by the new Congress that increasing aid this time around will do what’s been long promised and lower cost? You’d think from the Left’s rhetoric that there’s a direct relationship between more aid and lower prices. Not so. Every time aid increases, tuition increases. The College Board—which tracks all these figures— reports that since Congress ratified the Higher Education Act in 1965, tuition has escalated 44 percent.