student aid

Yes, Fixing Higher Ed Means Eliminating Federal Aid

National Review Online is in the midst of its “education week” – including offerings by yours truly and Jason Bedrick – and today brings us a piece by AEI’s Andrew Kelly on how to fix our higher ed system. Unfortunately, while he largely nails the problems, he stumbles on the solution.

Kelly is absolutely right when he criticizes the Obama administration for demonizing for-profit colleges – see my piece for the evidence that for-profits are not the problem – while simultaneously observing how odd it is for conservatives to decry as some great violation of free-market ideals attacks on institutions that get the vast majority of their funds through Washington. He is also right that the entire ivory tower is awash in waste and failure, and all institutions – for-profit or putatively not-for-profit – are self-interested money-grubbers. Finally, he correctly notes that it is a big problem that by far the largest student lender is the Bank of Uncle Sam, who basically gives to anyone who can breathe.

Where Kelly starts to get into trouble is in suggesting that a lot of these troubles could be meaningfully mitigated if we just had the right data readily available to consumers. He writes, “Basic pieces of information needed to make a sound investment — out-of-pocket costs, the proportion of students who graduate on time, the share who earn enough to pay back their loans after graduation — are either incomplete or nonexistent.”

Yes, Aid Fuels Tuition Inflation

At this point, I think I’ve said all I need to about the doubling of interest rates on subsidized federal student loans. Basically, the doubling won’t have a big impact one way or another, but putting a little more payment burden on the students consuming higher education is probably a good thing. Why? Because cheap aid encourages students to demand stuff they otherwise wouldn’t, and enables colleges to raise their prices at excessive rates.

The Student Aid Did It!

The College Board is out with its annual reports on college prices and student aid, and the story is pretty familiar. According to The New York Times, the reports reveal that over the last year tuition and fees rose 8 percent at public, four-year schools, and 4.5 percent at private non-profits. Meanwhile, student aid rose at a very fast clip. Indeed, over the last five years, despite lightning-quick growth in sticker prices, after-aid college costs actually dropped.

Obama Ringing the Pell

As part of his ill-considered credentialing-to-compete initiative, President Obama wants to greatly increase both the size and availablity of Pell Grants. Under his proposed FY 2011 budget, the total pot of Pell aid would rise from $28.2 billion in 2009 to $34.8 billion in 2011; the maximum award would go from $5,350 to $5,710; and the number of students served would rise by around 1 million.  

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