August 28 2012

No Coincidence: Troubling Link Between Government Spending and Higher Tuition

Krista Kafer

If I didn’t know better, I’d think the world was flat. After all, it looks flat. It wouldn’t occur to me that I was standing on a sphere. Greek mathematicians and mariners of old figured it out long ago. Magellan’s great voyage and later astronauts confirmed it—the earth is round. Still, this knowledge doesn’t quite square with what I see and feel. Truth is sometimes counterintuitive.

Similarly, if I didn’t know better, I’d believe that government subsidies for higher education would bring down tuition costs. After all, if a college charges students a certain amount and the government offers to pay a portion, shouldn’t student tuition payments go down? Every time a politician proposed new higher education spending, larger Pell Grants, and higher subsidies, I’d clap my hands in support and praise him for making college more affordable for the young people I love.

Sadly, research shows higher education spending will have the opposite effect. As government subsidies have increased, tuition rates have gone up. The cost of earning a four year degree has more than doubled in the past few decades. It isn’t a coincidence. Dr. Richard Vedder, Professor of Economics at Ohio University, and other researchers have discovered a troubling link between government spending and higher tuition. Dr. Vedder, in particular, found that “[O]ne dollar in grant aid leads to tuition fees somewhere around 35 cents higher than would otherwise be the case.”  When the government chips in, colleges and universities absorb the extra funds and continue to raise tuition.

Higher tuition costs mean higher student debt. Since the Clinton Administration, government grants, loans, and tax credits for higher education have more than doubled to $169 billion while outstanding student loan debt has doubled to $1 trillion according to Professor Vance H. Fried of Oklahoma State University. The higher government spending, higher tuition rates, and higher student debt cycle hurts graduates who carry the burden of well-meaning but disastrous public policy, especially in this tough economy. Half of all graduates with a bachelor’s degree under age 25 are unemployed or underemployed.  For college drop-outs (some 42% of BA degree students don’t graduate in 6 years), the burden is even worse. It isn’t easy to pay back a $30,000 loan serving espressos.

At a State of the Union speech, President Obama paid lip service to the pernicious cycle of government spending and higher tuition costs saying, “We can’t just keep subsidizing skyrocketing tuition,” yet under his tenure in office, he’s done just that. In fact, his campaign trumpets his record of doubling spending on scholarships and financial aid.

At his recent campaign stop at college campuses, he will no doubt capitalize on the naivety of the audience. Students will applaud the President’s commitment to higher education spending because such policies seem beneficial. Meanwhile tuitions will continue to rise, debt will mount, and employment prospects will dim. It’s only a matter of time before they realize the earth isn’t flat.

 

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