NCPA - National Center for Policy Analysis


February 10, 2005

Congress should not reauthorize the Higher Education Act because it will create more demand for higher education and increase college tuition costs, says Gary Wolfram (Cato Institute).

Instead of expanding the current system under HEA, Wolfram recommends that Congress consider a 12-year phase-out program to remove federal assistance from higher education. If implemented, he projects:

  • Sticker tuition prices should decline.
  • The private market should respond to the phase-out of federal assistance: That response would likely take three forms: additional private-sector loans, additional private scholarship funds, and perhaps most importantly, the expansion of human capital contracts.
  • Human capital contracts, first suggested 40 years ago by Nobel Laureate Milton Friedman, would allow students to pledge a portion of future earnings in return for assistance in paying their tuition.

The federal government should not be providing financial assistance to induce people to obtain a higher education, says Wolfram. Such activity should be left to the states and individuals.

While it would be nice to evict the government from higher education finance and totally scrap HEA, says Wolfram, the reality is that more than 10 million students and their families rely on some form of federal assistance for their college education.

With such large numbers relying on government funds, Wolfram concludes that the integrity of higher education is threatened when the federal government uses financing to affect the behavior of state and private institutions. Colleges and universities lose their independence and that loss affects the independence of political opinion from the government's position.

Source: Gary Wolfram, "Making College More Expensive: The Unintended Consequences of Federal Tuition Aid," Policy Analysis No. 531, Cato Institute, January 25, 2005.

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