Bloomberg, WSJ: Student Aid Increases Tuition

retroworks writes "Bloomberg News makes the case that when the federal government offers tuition assistance, students apply to more expensive colleges, giving the institutions an incentive to raise tuition and a disincentive to lower it. (The Wall Street Journal has a similar article, but it's paywalled.) This reminds me of the debate over President Reagan's cuts to the Pell Grant program in the 1980s. MIT's Campus Paper 'The Tech' quoted the MIT administration as saying it had 'no idea what really will occur' when Reagan's proposal to cut Pell came to Washington. So the question is, 25 years later, do we know now? Did cuts to federal tuition assistance hurt the education of the lower income students? Did increases to Pell grants create more opportunity? Or is federal money the milkshake, and students are just the straw?"

Comments

well, duh

[therealkevinkretz]

If more money is made available to to students for education, then:

1) more people will become students (intended)

2) educational institutions will raise their prices so as to absorb all the available funds (unintended)

Re:well, duh

[Anonymous Coward]

If I am a school and I have learned that students can borrow $60,000 a year from the government, then I am sure as hell I will raise my prices to get htat "free money".

Re:well, duh

[Anonymous Coward]

A) Minimum wage in the US is NOT hovering around $10, it's $7.25. The difference between $10 and $7.25 with regards to pay is huge, not a rounding error.

B) You cannot live on minimum wage in the US anymore.

Re:well, duh

[demonlapin]

Just because schools operate as not-for-profit enterprises does not mean that people don't make money off them. Administrators like bigger budgets and paychecks.

Re:well, duh

[stewbee]

I would not calling living on minimum wage in the US as surviving, at least in major cities. Take for example Chicago, since I am most familiar with it. For simplicity, lets assume you work 4*40 hrs/ month. this equates to 160 / month. Minimum wage in Illinois is $8.25/hr (which is more than the national minimum btw). this is a net of $1320/month. Looks good, but Illinois now take 5% leaving $1254. The feds will take 15%, leaving $1056. I don't know the exact rates for Medicare and SS, but lets assume that it will put you under $1k.

So you pretty much need a place to live. The rent for a studio apartment, assuming you don't get a roommate, is going to run about $600 - $700 /month leaves you with about $300-$400/ month. Transportation is going to be about another $100/month for a monthly CTA pass. Taking you down to $200-$300 month. Oh, you want to eat too? ~$200/month (granted, you probably qualify for food stamps, but you still need to pay some money out of pocket). An viola, you are out of money. I didn't even mention utilities or other living expenses.

tl;dr version:
Living on minimum wage is hardly a living wage. It is hardly enough to cover the bare necessities in the US. Most likely you will need to get a second job to make ends meet.

Re:well, duh

[vlm]

you know, if you had spent 25 bucks a week more on food (probably more than you would need to) you would have accrued 5K or so more debt over 4 years. While that seems like a lot, the benefits, both physically and mentally, of not being malnourished while you were in school

Most important life skill at high school graduation is knowing how to cook. Not how to read directions on a frozen pizza wrapper, but really cook. Aside from the obvious health benefits its incredibly freaking cheap and tasty food simply puts you in a better mood, not to mention how the ladies enjoyed my home cooked meals. Try to survive on hot pockets and McD value meals and Raman and you won't live well or long.

Re:well, duh

[Darth Snowshoe]

The problem is that not everything should be, in a reasonably just society, subject to the unmitigated forces of the market. Senator Ryan imagines families taking their medicare vouchers and shopping very carefully for the most cost-efficient medical care. It doesn't happen that way. If your grandmother arrives at the emergency room, having received CPR on the ambulance ride, you don't want to have to shop around. You want care right then - in the room that she's currently occupying.

Similarly, your daughter wants to be a geologist. But the best geology program is (I'm making this up) North Dakota State. You don't have the option of moving your family to North Dakota to score in-state tuition. You can't tell her that her best option financially is to study to become a nurse instead. Education is not a commodity that you buy by the pound or by the linear foot.

Most people understand that a higher education is their best option for improving their lot in life. It's dawned on universities that they sell something of high, but uncertain, value. They realize they can raise their prices to compensate (and some, simply to take advantage). Do you want the higher education your kids are getting to be a shell game, where some of them are guaranteed to get the value out of it that they put into it, and some of them do not?

The truth of the matter is that, over the course of the last few decades, federal and state subsidies to private and public universities, and also to academic research generally, have shrunk and shrunk. Private loans to individual students are a poor compensation for that. Even people who never have kids of their own derive some value from living in a society where higher education is valued and pursued.

One of the reasons that the best and the brightest from around the world come to America is that they perceive the value of a university education here to be high compared to elsewhere. If that becomes no longer true, there will be less motivation for talented people to come here and participate in our economy.

Re:well, duh

[istartedi]

Loans are arms and the lenders are arms dealers. The people who graduated ahead of you bought the bullets and effectively shot you out of the economy. They effectively pit us against eachother when competing for any big ticket item: house, car, education, etc.

Just as in war, a combatant sometimes wins; but arms dealers always win.

What about state budget cuts?

[jpstanle]

Increased availability of aid and loans may very well create some tuition inflation, but I seriously doubt it is the major driving factor at public universities. It took me a while to graduate since I got called up to active duty for a while, but the tuition at the in-state public land grant university I attended nearly doubled between when I entered as a freshman and when I graduated. In 2003, tuition and fees was about 2200 USD/semester, but had ballooned to just over 4000 USD/Semester in Spring 2011. As far as I am aware, there hasn't been massive increases in the availability of aid or loans in that span (in fact, I'd argue generous private loans have become LESS available since 2008). What HAS happened is massive state budget short-falls due to economic downturns and short-sighted tax cuts. When the state is short on cash, higher education funding seems to always take the brunt of the damage in budget cuts, so public universities make up the difference by hiking tuition and/or recruiting out-of-state students.

Re:Applies to many situations

[Hatta]

Back when I lived in Minnesota there was a big todo over welfare moms having more children simply to get an increase in welfare aid.

Which is almost certainly a complete fabrication on the part of conservatives. State aid is never enough to pay for all the costs a child incurs. Did they have any actual data on how often they claim this occurs? Or did they just make something up (in the grand tradition of Ronald Reagan), and harp on it until people thought it was a real problem?