Jewish World Review Feb. 11, 2005/ 2 Adar I, 5765
Driving up the cost of college
"We must open the doors of college to all Americans," declared the president in his State of the Union message. "To do that, I propose . . . The largest increase in Pell grant scholarships in 20 years."
Do you remember hearing George W. Bush say that last week?
Actually, you don't. Those words are from President Clinton's State of the Union address in 1997. But if you tuned in to Bush's speech on Feb. 2, you heard him say something quite similar: "We will make it easier for Americans to afford a college education by increasing the size of Pell grants." The new budget he unveiled this week would gradually raise the maximum annual grant to $4,550, an increase of $500.
Presidents come and go, but laments about the high price of higher education are eternal and so are calls for ever more federal aid to mitigate it. For 60 years, the federal government has been shoveling money into programs meant to make college more affordable yet a college degree today is more unaffordable than ever. Rarely has Washington so comprehensively worsened a problem it was determined to solve.
Beginning with the GI Bill in 1944, federal tuition aid has metastasized into a dizzying array of subsidies, most of which are now encompassed in the Higher Education Act. In addition to Pell grants, there are Federal Supplemental Education Opportunity grants and Federal Work-Study jobs, as well as Perkins Loans, Family Education Loans, Direct Student Loans, and Stafford (or Guaranteed) Student Loans. In 2005, these will account for more than $73 billion in overall federal financial aid to college students.
Then there are the billions of dollars' worth of tuition credits and deductions written into the tax code the Hope Tax Credit, the Lifetime Learning Tax Credit, the higher education expense deduction, the student loan interest deduction, and the tax-exempt Qualified Tuition Plans, known as "529s."
And the result of this energetic government campaign to hold down the cost of a college education? The cost of a college education is skyrocketing and has been for years.
Tuition and fees were up 10.5 percent at state colleges and universities last year. The year before that, they were up 14 percent. Every year for nearly a quarter-century since before most of today's college students were born higher education costs have raced ahead of inflation. And far from slowing this runaway train, government aid serves only to stoke the engine.
How could it do otherwise? Every dollar that Washington generates in student aid is another dollar that colleges and universities have an incentive to harvest, either by raising their sticker price or reducing the financial aid they offer from their own funds. Higher Education Act funds "are seen by colleges and universities as money that is there for the taking," observes Peter Wood, an anthropology professor at Boston University. "Tuition is set high enough to capture those funds and whatever else we think can be extracted from parents. Perhaps there are college administrators who don't see federal student aid in quite this way, but I haven't met them." In 10 years of attending committee meetings on the university's annual tuition adjustment, says Wood, "the only real question was, 'How much can we get away with?'"
It's an old story. City University of New York began charging admission in 1976, ending a century-old tradition of free tuition. As New York's deputy commissioner of education later explained, that decision was eased considerably by the knowledge that students would qualify for government aid.
The anecdotal evidence is backed up by scholarship. In a new monograph for the Cato Institute, political scientist Gary Wolfram surveys the literature on the effect of financial aid. "The empirical evidence is consistent," he finds, in showing that "federal loans, Pell grants, and other assistance programs result in higher tuition for students at our nation's colleges and universities."
The cat has been out of the bag for a long time. In a 1987 New York Times column titled "Our greedy colleges," Ronald Reagan's education secretary, William Bennett, rebuked colleges and universities for repeatedly jacking up tuition far beyond any reasonable adjustment for inflation. "Increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions," Bennett charged, "confident that federal loan subsidies would help cushion the increase."
Isn't it time to stop pouring fuel on this fire? Instead of renewing the Higher Education Act, Congress should phase it out, thereby forcing colleges and universities to compete on price. That would leave financial aid to the private sector, which can target it far more effectively and where it should have been left all along.
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