How Federal Aid Drives Up College Tuition

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

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
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 states 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
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%
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.”

Hans Bader is Senior Attorney at the Competitive Enterprise Institute.

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