| | | Bloomberg wrote a prescient article on Obama's plan to reduce college costs. The author said costs would keep rising, because of government meddling, and sure enough it did.
bloomberg.com
College Costs Will Keep Rising Under Obama Plan
Obama proposes to ignore or worsen the root cause of much of the explosion in student costs: the federal financial assistance programs that encourage schools to raise costs and that haven’t achieved their goals of providing college access to low-income Americans.
Two recent studies highlight the problem. First, the National Center for Education Statistics released data suggesting that federal college financing is growing rapidly. Now 84 percent of full-time undergraduate students get some aid. Average grant assistance for dependent full-time undergraduate students (unmarried, younger than 24) was $10,600 in 2011-12, up 34 percent in just four years -- four times the inflation rate.
Middle-class kids who were previously denied Pell grant aid are now increasingly getting it: In 2011, 17.5 percent of dependent students from families with $60,000 to $80,000 in annual income received Pells, compared with a mere 1.6 percent just four years earlier. A number of federal aid programs -- for example, tuition tax credits and the PLUS loan program -- now disproportionately serve students from relatively affluent families. According to College Board data, total federal student financial assistance programs totaled $56.8 billion in 2001-2002, compared with $173.8 billion a decade later, an astonishing compounded annual rate of increase of 11.7 percent.
Increased SpendingA new study by Dennis Epple, Richard Romano, Sinan Sarpca and Holger Sieg for the National Bureau of Economic Research suggests that the impact of these aid programs is clearly different from what federal policy makers intended. “We show that private colleges game the federal financial aid system,” they conclude. Every dollar in new financial aid to students leads to about 40 cents less spent by the colleges on institutional financial aid -- so students benefit far less than federal policy makers intended.
In 1987, Secretary of Education William Bennett argued that more federal aid leads to higher tuitions, enabling schools to increase spending. This seems broadly consistent with the latest research results. The net attendance impact of these federal programs, according to the study for NBER, is “modest.” In short, these programs haven’t substantially spurred student access to colleges, all the while burdening taxpayers and student borrowers.
The ballooning federal aid increases schools’ spending. The researchers don’t analyze changes in university spending, but an examination of other evidence suggests that money isn’t going primarily into improving instruction. Colleges have gone on a building spree (financed in part by amassing large debt -- more than $220 billion at schools whose bonds are rated by Moody’s alone), and pay and perquisites for top university administrators has risen sharply.
Obama’s “tough love” on higher education should begin by reversing the financial aid explosion that has contributed to this spending binge and, more importantly, to the system that has produced a generation of young debtors with mediocre job prospects. The president is looking at the tip of the iceberg, not its bigger base. |
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