Federal financial aid to college students may have contributed to the rising college tuition rates in recent years, according to a new report published by the libertarian Cato Institute.
Written in anticipation of Congress’ pending reauthorization of the Higher Education Act — which sets the amount of most federal aid awarded to college students — the report was authored by Hillsdale College political science professor Gary Wolfram.
Titled “Making College More Expensive: The Unintended Consequences of Federal Tuition Aid,” the report argues that greater university access for low-income students provided by federal aid leads to a higher demand for postsecondary education, causing a rise in tuition prices. However, the extent of this inflation is difficult to determine due to other factors affecting tuition, the report states.
In fact, federal aid to students may decrease support provided by state governments and universities themselves and may increase government red tape for colleges, which must comply with various federal regulations to receive federal aid, according to the report.
“For democracy to work, it is important that the institutions that educate those who will participate in the democratic system be truly independent of the government,” Wolfram stated in the report.
To remedy the problems posed by federal financial aid, Wolfram said he suggests a gradual phasing-out of federal subsidies over a 12-year period.
“I feel there ought to be some predictability in government, so I don’t think we ought to get rid of [federal aid] right away,” Wolfram said. “But we should start to phase it out. That way, people who are sophomores in high school now would know what to expect.”
A cut in federal subsidies will likely lead to an increase in other forms of aid, including private loans and scholarships, he said. In addition, Wolfram said he advocates the concept of “human capital contracts,” which allow students to borrow private money by agreeing to pay back the debt with a set percentage of their income upon graduation.
“The private sector would start to take over, and over time, [human capital contracts] could be a powerful instrument — certainly more efficient than the way we do it now,” Wolfram said.
However, Larry Zaglaniczny, Director of Congressional Relations for the National Association of Student Financial Aid Administrators, said he did not completely agree with many of Wolfram’s ideas.
“It’s certainly a report that will stimulate debate and advance the financial aid discussion in Washington,” Zaglaniczny said. “We’re just not certain that it is valid in a number of respects, especially in terms of the solutions provided.”
Eleanor Roosevelt College freshman Christina Ro said Wolfram’s capital-contract solution left her skeptical, too.
“The idea appeals to me because I would definitely appreciate it if tuition went down, but it doesn’t really seem feasible,” Ro said. “The idea that taking away aid would just make tuition decrease and not have other consequences seems unrealistic.”
Ro is one of more than 5 million students receiving federal Pell Grants, which, under the Bush administration’s proposed 2005 budget, would receive over $12 billion in funding this year — a number that Wolfram said should be decreased.
“It’s a riverboat gamble to assume that tuition prices will decline and that the private sector will respond,” Zaglaniczny said. “I highly doubt that additional private loans would become available in the scope necessary to replace Pell Grants.”
Wolfram said he admitted that the results of reducing federal aid might not benefit everyone.
“Some people are going to get better access [to higher education], some people are going to get worse access,” Wolfram said. “It’s possible fewer people may end up going to college — certainly a different mix of people.”
