Education Aid = Tuition Hikes

During his State of the Union address, President Bush said, “We will make it easier for Americans to afford a college education, by increasing the size of Pell Grants.” However, increasing the size of Pell Grants may make college more expensive, according to a new report from the Cato Institute, a Washington, DC think tank.

“One result of the federal government’s student financial aid programs is higher tuition costs at our nation’s colleges and universities,” Gary Wolfram [pictured] writes in “Making College More Expensive: The Unintended Consequences of Federal Tuition Aid.”

The idea that federal aid increases tuitions is not new, writes Wolfram. In 1987 Secretary of Education William Bennett wrote in the New York Times, “If anything, increases in financial aid in recent years have enabled colleges and universities to blithely raise their tuitions, confident that Federal loan subsidies would help cushion the increase.”

Now hard evidence backs up Bennett’s claim. Wolfram cites a study that shows, “Private four-year colleges increased listed tuition prices by more than two dollars for each dollar increase in Pell Grants, and public four-year colleges increased their listed tuition by 97 cents for every dollar increase.

Beginning in the early 1980s and continuing today, the price of college has been increasing faster than inflation. “In the 10-year period ending in 2004-05, tuition and fees at four-year public colleges and universities rose 51 percent and rose 36 percent at private colleges in constant 2004 dollars,” Wolfram writes.

When tuition does increase, the federal aid often justifies the hike. “Board [of Trustees] members feel that the tuition increases do not harm low-income students substantially, since for some their Pell Grants will increase, and for the rest, their student loans will go up with tuition increases,” according to Wolfram.

Accordingly, the federal government bears the brunt of tuition increases and students see little change in college expense. Even if tuition does not rise as federal grants increase, students see little benefit. “Federal financial aid may be passed to state governments if state governments reduce their appropriations to higher education or reduce state financial aid,” Wolfram writes.

Apart from practical challenges to federal aid—such as the effect on tuition—critics worry that federal aid leads to a federal influence. When a college accepts federal money, it loses its independence and is subject to the mandates of the federal government, such as Title IX. Title IX regulations have led to more women’s sports scholarships and fewer athletic opportunities for men, particularly in track and field and wrestling. According to Wolfram,

Unfortunately, the Supreme Court has ruled that if a college or university accepts a student who receives federal aid, that institution must follow federal rules and guidelines, even if the institution itself never directly receives federal funds.
Thus, Pell Grants and federally subsidized student loans create a mechanism for the federal government to establish some control over colleges and universities.

The report suggests that federal assistance for higher education end, though not immediately. “Congress should phase out the federal assistance program over a period of 12 years and allow the charitable sector to provide assistance to college students,” Wolfram writes.

Larry Scholer is a staff writer at Accuracy in Academia.