News - Federal Student Loans Increase Tuition Costs, Studies Show

News – Federal Student Loans Increase Tuition Costs, Studies Show

“In 1987, then-secretary of education William J. Bennett penned an article in the New York Times entitled “Our Greedy Colleges,’” Jenna A. Robinson writes in her analysis paper “The Bennett Hypothesis Turns 30,” revealed by the James G. Martin Center for Academic Renewal in December 2017. “In it, he wrote, ‘If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase,’” Robinson wrote.

Evidence ‘Is Compelling’

Robinson’s analysis merged findings from 25 empirical research on the Bennett Hypothesis. Fourteen research, greater than half of the entire, reported will increase in federal help had a optimistic impact on will increase in tuition. Seven discovered student help had no impact on tuition costs.

“Taken together, the research suggests that it is likely that federal financial aid does enable or contribute to increases in tuition, probably to a large degree,” wrote Robinson. “The evidence in favor of the Bennett Hypothesis is compelling. It is most likely that federal financial aid significantly increases the cost of college, possibly across all sectors.”

‘An Ugly Cycle Ensues’

“The theory is really just common sense,” Robinson wrote in an article for the James G. Martin Center summarizing the examine. “If the government gives money to students to spend on education, then students will be able and willing to spend more on that product. Universities, knowing that the funds are available, raise tuition without worrying about whether students can afford it. An ugly cycle ensues.”

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Indeed, faculty tuition has elevated sooner than inflation for a few years, Robinson states within the examine. “The price of college tuition and fees has risen 1,335 percent since 1978: much faster than inflation and faster even than medical care (704 percent) and housing (511 percent),” Robinson writes.

Not So Simple?

Michael Rizzo, an economist on the University of Rochester who research increased schooling, says it’s unwise to imagine too easy a connection between federal help and tuition.

“There are many reasons for high and increasing tuition,” Rizzo stated. “Subsidizing college increases the demand for college. Whether one would expect a small, large, or negligible effect on tuition depends in a huge way on the underlying elasticity of supply of seats at colleges. I think private schools choose not to expand seats, even though doing so would not be very expensive.”

Rizzo’s idea could clarify why not all of the research discovered help affected tuition. The Martin Center report says the impact is clearer with student loans than with grants. Pell Grants are sometimes lower than the worth of tuition and fewer prone to push it up.

“Going forward, the Department of Education’s main focus should be on Pell Grants to the nation’s neediest students,” Robinson wrote.

Such grants, that are restricted in scope and dimension and meet a real want, are the coverage least prone to encourage faculties and universities to lift tuition, Robinson states in her article. Robinson additionally recommends “skin in the game,” a coverage by which universities need to bear among the reimbursement prices when students borrow taxpayer cash after which drop out. Such a provision is a part of a proposed congressional revision of the Higher Education Act.

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Far-Reaching Consequences

Thomas Lindsay, director of the Center for Higher Education on the Texas Public Policy Foundation, says our whole nation is affected by increased tuition costs.

“The tuition hyperinflation under which we have suffered injures not only students, their parents, and college professors, but the American economy as a whole,” Lindsay stated. “As William Bennett said it in 1987, ‘Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.’

“The Martin Center’s recommendations would do much to right the ship,” Lindsay stated.  “Universities must share some of the costs of these policies in order to incentivize them to economize on their expenses. Moreover, we must refocus our funding to address the truly needy through Pell Grants, which studies demonstrate are the means of support least likely to cause universities to hike tuitions further.”

Jane S. Shaw ([email protected]) is School Reform News’ increased schooling editor. 


Jenna A. Robinson, Ph.D.: “The Bennett Hypothesis Turns 30,” The James G. Martin Center for Academic Renewal, December 2017:

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