Commentary

Taxpayers Suffer from Exaggerated Death of Affordable U.

Earlier this month (9/15), a great wailing and gnashing of teeth was heard throughout the land: “National Study Shows Colleges in Need of Help,” lamented the New York Times. “U.S. Colleges Get F in Affordability,” bemoaned the Detroit Free Press. “American Colleges Flunk on Affordability,” decried CNN.com. The college dream, it seemed, was dying.

At least, that was the media’s reaction to Measuring Up 2004, a report from the National Center for Public Policy and Higher Education (NCPPHE), which declared that “for most American families, college is less affordable now than it was a decade ago.”

But wait: several recent studies have shown that college has actually become more affordable. A National Center for Education Statistics (NCES) analysis, for instance, found that between 1990 and 2000 the average after-aid cost of tuition, fees, and living expenses dropped at private colleges and remained flat at public universities. Similarly, a June USA Today analysis concluded that “today’s students have enjoyed the greatest improvement in college affordability since the GI Bill.”

Why are NCPPHE’s findings so different?

Because when calculating families’ ability to pay for college, the report’s authors determined that Pell grants “are by far the largest component of federal grant aid,” and therefore the only federal aid worth counting. It’s flawless logic, as long as the goal is to grossly underestimate federal aid, wildly exaggerate college “affordability” problems and keep taxpayer dollars flowing to universities.

Start with the contention that non-Pell grants are too miniscule to matter. The College Board’s Trends in Student Aid 2003 shows that in the 2002-03 academic year, the federal government spent over $4.1 billion on non-Pell grant programs. Granted, that’s less than the $11.7 billion Pell expenditure, but it’s hardly an irrelevant amount of money. Next, add non-grant aid like work study, which supplied $1.2 billion, and higher education tax credits, which were valued at $5.4 billion, and non-Pell aid comes out to $10.7 billion — almost the same as Pell. Finally, add student loans, which totaled over $49 billion in 2002-03, and it’s clear that Pell is far from the final word on federal aid. And that holds for growth as well as total size: Pell expenditures grew only 48 percent over the last ten years, while total federal aid ballooned 120 percent.

A disproportionate amount of that growth, to be fair, was in loans, which NCPPHE doesn’t consider “aid” because the money must be repaid. But that actually makes them the fairest way for those needing help to get it. Unlike with grants, both the student and lender benefit from loans. The average college graduate is expected to make $1 million more over the course of her lifetime than she would have had she not gone to college. A loan enables her to get her education now, when money’s tight, but she doesn’t have to pay most of the cost of that education until she’s started earning her extra million. The lender — in the case of federal aid, the taxpayer — eventually gets his money back with interest. Of course, federal loans still favor students, with interest rates pegged below market value and the government often paying the charges while students are enrolled in school.

Which brings us to the report’s most predictable omission: discussion of higher education’s ever-increasing burden on taxpayers.

According to soon-to-be-released NCES data, total inflation-adjusted state funding for public colleges rose from $44.2 billion in 1990-01 to $56.3 billion in 2000-01. In addition, College Board figures reveal that federal and state student aid rose from $35.2 billion in 1992-93 to $77.2 billion in 2002-03. Taxpayers are clearly suffering, and the vicious cycle of student aid ensures the pain won’t soon end. As long as taxpayers foot much of students’ college bill, students will choose more expensive schools than they otherwise would have, colleges will raise prices to capture federal aid, students and parents will in turn demand more support, politicians will provide the aid to win votes, prices will rise again, and so on.

Of course, there’s little reason for a report like Measuring Up to discuss that phenomenon. It was prepared largely by people in higher education who benefit whenever taxpayer money is dumped into academe’s coffers. The media, too, have little incentive to examine it because anecdotes about supposedly destitute students are more gripping than objective analyses of college costs. So exaggerated stories about the death of college affordability will likely keep coming, and the destructive effects of government “aid” will continue to be ignored.

Neal McCluskey is an education policy analyst at the Cato Institute.