NCPA - National Center for Policy Analysis

The Scourge of Government "Affordability"

March 5, 2012

Every time government tries to make something more "affordable" for consumers, it makes it more unaffordable.  Soaring college tuition is just the latest example, says Investor's Business Daily.

After creating housing and medical bubbles in the name of "affordability," Washington now wants to make college more affordable.  How?  By subsidizing it even more.  Yet new studies show federal student aid is what is pushing college costs up faster than inflation -- faster than even health care costs.

  • Columbia University looked at federal aid data from 1996 to 2008 and found that, on average, colleges raised tuition $17 in response to every $100 of Pell Grant aid.
  • A joint study by Harvard and George Washington universities found that for-profit colleges eligible for Title IV aid charged tuition that is 75 percent higher than for-profit schools that don't take such funding.
  • In other words, Washington -- which spends $140 billion a year on college grants and loans -- created the tuition bubble.

Massive subsidies create artificial demand for college.  That further distorts prices.  As part of his "Race to the Top for college affordability" campaign, President Obama announced he is "increasing federal student aid so more students can afford college."  This includes expanding Pell Grants.

  • State colleges that control costs will be rewarded with "additional federal support," the president said, ignoring evidence showing his incentive will work against his goal.
  • He also plans to pour $8 billion into community colleges to help train students for his vaunted "green jobs."

Source: "The Scourge of Government 'Affordability,'" Investor's Business Daily, March 1, 2012.

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