Cross-posted from Free Exchange on Campus.
What next? First we had to put up with a Republican controlled Congress who decided a good way to "balance" the budget would be to put it on the backs of college students and their families in the form of student loan debt burden. That helpful domestic policy was coupled by an administration, who, despite promises, has kept the maximum Pell grant award frozen for the last four years (I suppose that is better than cutting the Pell).
The Pell, according to the College Board’s 2006 Trends in Student Aid (PDF) reports that purchasing power of the Pell during those years fell from 42 percent of the average public four-year program to 33 percent.
The result: Growing disparities about who can afford and cannot afford college leading to students being priced out of college.
Then, the 2006 midterm elections swept in new Congressional leadership with a New Direction for America that included cutting student loan interest rates and raising the Pell grants to help realize the real goal of higher education financial aid: college access for all. However, before the new Congress can even get into office a new meme about helping students afford college is working its way into the media and here it is.
Financial aid for college students is just the same as subsidies for big oil and the public should be outraged!
Stop with your hyperbole you say! Well here is David Frum from the Against Everything (Public) Institute, I mean, the American Enterprise Institute this morning on NPR's Marketplace:
Imagine if the Republicans had retained their Congressional majority and the first thing they did was suggest big new subsidies for, say, the oil industry. Would there no public outrage?
But that's exactly what the Democrats are now offering their staunch supporters in academia. The Democrats are proposing big new subsidies for college tuition: new loans, new grants, new tax deductions.
Frum is arguing that if the Democrats try to help students and their families by cutting student loan interest rates and raise the Pell grant award level it will simply lead to higher tuition. In short, the Democrats are just shills for money grubbing colleges and universities. Right, because institutions of public higher education are just trying to raise their profit margins like big oil. Let's skip the whole colleges and universities are primarily nonprofit organizations argument and look at the core argument here: student aid leads to higher tuition.
Frum argues that:
Just about every economist agrees that federal student aid has the opposite of its intended effect: It enables colleges to raise tuition even faster and even higher than they otherwise would.
The problem with Frum's argument is similar to what Cornell's Ronald Ehrenberg argues in his discussion (PDF) of Richard Vedder's book Going Broke by Degree, published and promoted by, you guessed it, AEI. The problem, according to Ehrenberg is that Vedder "always approaches things from the right [which results in] a polemic in which political philosophy, rather than empirical evidence, shapes statements and drives policy conclusions." Seems to be a general problem at AEI.
Perhaps for empirical evidence, we ought to look to the Department of Education's National Center for Education Statistics, which tracks data about education, including higher education.
NCES's last Study of College Cost and Prices looks at the relationship between Financial Aid and Prices at Higher Education Institutions. Here are some key findings:
Its analysis of previous studies on this issues concludes that "[t]he issue of whether various forms of financial aid ‘cause' tuition increases remains unresolved." Looking specifically at grant aid, the report points out that "the National Commission on the Cost of Higher Education in its report to Congress in 1998 . . . concluded that the evidence showed no relationship between federal grant aid and prices." The report goes on to show that there is some disagreement about that finding and consequently, "[t]he issue is unlikely to be fully resolved until better data become available and/or more research is conducted." And finally on the relationship between student loans and college costs, the report states that the "[r]esearch on the possible relationship of federal loan aid to prices has been even less conclusive, suggesting that if such a relationship does exist, it may be indirect."
Doesn't really sound like there is the definitive agreement out there that Frum is suggesting. More to the point, Frum ignores other significant factors for why tuition is going up so dramatically. He ignores enrollment growth, pressures for new and necessary services such as technology and most importantly he ignores the fundamental factor leading to colleges raising tuition, state appropriations which over the last three years have been stagnant and, longer term, have taken a nose-dive over the last 25 years.
But really this isn't about higher education or about helping students. The argument by Frum, Vedder and other AEI'ers is nothing more than anti public-service politics. To suggest that trying to help working and middle-class families by increasing student aid and trying to reduce the student loan debt-burden is similar to subsidizing big oil is not only wrong, it shows a reckless disregard for the average American family.