The Tuition Is Too Damn High (…Because of Government Subsidies)

The Washington Post is currently running a series of research pieces on the economics of higher ed entitled “The Tuition Is Too Damn High.”  Last week, I criticized Washington Post blogger Dylan Matthews’ assertion that paying for a college education is uniformly worth it, arguing that although aggregate data on employment and wages suggests that an investment in higher education is absolutely worth it, multiple factors make the proposition more complicated (and risky) than many observers think. Those observers include parents, many of whom feel like they have forked over thousands of dollars for nothing, especially if they see their kids back in the basement or working at CVS.

Today, the Post ran a piece with the headline “Is Government Aid Making Tuition More Expensive?” Bill Bennett decisively said yes in 1987, writing an op-ed for the New York Times entitled “Our Greedy Colleges.” Essentially, the Bennett hypothesis suggests that a steady supply of federal money (in the form of student loans and grants) has allowed institutions to push tuition prices higher.

Matthews interprets multiple reports on the subject over the years to arrive at a fair conclusion: “what may be most important is the form the aid takes, rather than it exists at all.” In general, private colleges are the schools which have taken advantage of the student loan monster to pump up tuition; public four-year colleges and community colleges are suffering from hard times in state budgets. The most important work done on the Bennett Hypothesis is by Andrew Gillen, who released the report “Bennett Hypothesis 2.0” last year. Gillen rightly noticed that aid affects students in different ways. Pell Grants for a poor student is a much more productive investment than Pell Grants for a middle-class kid, who will often take the money to a more expensive school which doesn’t really need it.

Matthews’ take is just another example that the Bennett Hypothesis is very much a mainstream policy idea. As I noted in a previous post, Slate’s Matt Yglesias, Derek Thompson at the Atlantic, and Rolling Stone’s Matt Taibbi have all recently written pieces acknowledging that the federal government has been mightily complicit in the rising costs of college. Matthews seems to agree, writing, “All but one study I’ve seen found some evidence of a price response to increases in aid, for some section of the higher ed market.” The liberal consideration, if not embrace, of the Bennett hypothesis mirrors the shift on school vouchers, for which Bennett was also an early advocate. In recent years, this was largely the product of the popularity of Teach for America and the production of the movie “Waiting for Superman.” I recall Bennett talking about “Waiting” for Superman some time after it came out: “I’ve been saying this for thirty years, but it takes a Democrat for people to listen to it.” The same can be said for the Bennett hypothesis.


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