Universities Don鈥檛 Need Any More Money?

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Fat Cat Universities Don鈥檛 Need Any More Money

College affordability is a problem, with tuition, room & board averaging above $31,000 a year. Reason to boost government aid, as the incoming Speaker says she will? Nope: That 鈥渟olution鈥?will only make things worse. Here鈥檚 why:

Colleges charge outrageous prices knowing that Washington always deflects cost. Consider that qualified students are eligible to receive $4,050 in Pell Grants per year and up to $23,000 per undergrad degree in Stafford Loans (the two main sources of federal student aid). That means there is at least $16,200 in Pell Grants and $23,000 in federal loans currently set aside to offset costs. That鈥檚 a whole lot of green college administrators can play with鈥?39,200 to be exact鈥攚hen calculating the sticker price. What incentives do schools have to be price-friendly and economically resourceful when the opposite behavior will multiply its piggybank? The government鈥檚鈥渉elping hand鈥?gives colleges a perverse market incentive to inflate costs.

Think that鈥檚 far-fetched? Consider that congressional spending for higher education jumped 686 percent between 1973 and 2005, the Office of Postsecondary Education tells us. Taxpayers shelled out $72.4 billion in 2005 compared to just $9.2 billion (in 2005 dollars) in 1973. Outlays rose 95 percent from 1995 to 2005 alone. Yet this soaring spending has not brought prices down鈥攊nstead, it鈥檚 goosed them up. Tuition鈥檚 grown more than twice as fast as inflation over the last 30 years, indeed, faster than the costs of food, clothing, and shelter.

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Universities Don鈥檛 Need Any More Money?

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