Saturday, January 06, 2007

The Tuition Rise

On January 11, 2007, several higher education groups are sponsoring a day to make college affordable. At the same time, conservatives like Jason Mattera of the Young America’s Foundation argue that more government aid to higher education will only cause tuition to go up.

There are several major mistakes in Mattera’s analysis and similar attacks on higher education. First, he focuses exclusively on federal funding of higher education, ignoring the fact that tuition hikes at public colleges are more often related to state funding cuts. Second, he ignores the increased demand for higher education and increases in the student population. Third, he ignores the increasing amount of institutional financial aid, which causes the sticker price of tuition to rise at a faster rate than the actual average price paid. Finally, Mattera ignores the fact that a free market exists. The relatively low Pell Grants would, one expect, cause people to seek out low-priced colleges where the Pell Grant covers a much larger percentage of the cost of tuition. Instead, students are attracted to elite, high-priced colleges no matter how high they raise tuition.

An analogy I would make is to the mortgage interest tax deduction. Does this lead people to buy homes more often, and to buy slightly more expensive homes? Yes. Does it cause the dramatic growth in the average size and cost of new homes? No. That’s caused by the free market. Should we limit the government subsidy to poor and middle-class individuals rather than subsidize the rich so much? Sure. But ultimately, it is the growing wealth in America that causes both more expensive houses and more expensive colleges. If anything, the investment value of a college education is much larger than the current tuition prices, which is why upward pressure is constantly working on them. The real threat to higher education is not greater funding, but the trend toward making a college education at elite universities into a luxury spa experience, rather than focusing on the quality of education. But cutting off access and government aid won’t solve this problem. More government funding doesn’t cause massive tuition hikes.

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