The link between student loans and rising tuition has been debated for years, but a brand new study from the New York Federal Reserve lends support to the claim that it is indeed subsidized loans that are driving up tuition. As The Week reports,
When subsidized federal loans have the effect of “relaxing students’ funding constraints,” universities respond by raising tuition to collect the newly available cash.
The resultant tuition hikes can be substantial: The researchers found that each additional dollar of Pell Grant or subsidized student loan money translates to a tuition jump of 55 or 65 cents, respectively. Of course, the higher tuition also applies to students who don’t receive federal aid, making college less affordable across the board.
The report also found that subsidized federal loans do not appear to increase enrollment.
3 thoughts on “The Culprit Behind Rising Tuition: Student Aid”
This is a very important finding. Depressing, not very surprising, but still really important.
Couldn’t it be argued that all this extra cash, however, is still going to the general project of making American universities among the best in the world? Isn’t it a way of getting federal, rather than just state, money into game? If universities adjusted tuition to what students could afford unaided, would higher education be much poorer–in every sense of the word–for it?
In the sense that rising tuition means lots and lots of money for American universities, possibly. However:
Absolutely not. The bulk of this money is from loans, not grants. And loans have to be paid back. By the students. Keep in mind that federal student loans are not dischargeable in bankruptcy. So all that money that may (or may not) be making American universities the best in the world is coming at the expense of saddling college students with huge stacks of debt.
Here’s the thing: American universities were already the best in the world before all this money started flooding in and I’m skeptical that the extra money from higher tuition helps significantly with increasing educational quality or is in any way needed for American universities to retain their edge. So I’m very skeptical of your proposed upside.
Meanwhile, the downside is that this money isn’t coming from tax revenue. It’s coming at the expense of young adults who start their lives off in debt up to their eyeballs. It’s true that in many of the most egregious cases there were some really bad decisions going on (i.e. doing into debt $100k for a humanities undergrad degree is maybe not a wise life choice), but this is certainly not a way for “of getting federal… money into the game.”
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