Making college more affordable makes it…less affordable?

Posted by Marc Hodak on August 3, 2015 under Invisible trade-offs, Unintended consequences | Be the First to Comment

 

Forking an extra $120 billion into the hands people paying college tuition might have had an effect in raising college tuitions. Who would have guessed? The irony is that the student loan and Pell grant programs were intended to make college more affordable for more people.

This new study doesn’t take into account the significant price discrimination practiced by colleges, which partly offsets the net cost per student, particularly for those from poorer backgrounds, versus the sticker price of tuition. Nevertheless, the average student that could once afford college by working summers now has to work a decade or longer to pay for school because of skyrocketing tuition.

So, according to the Fed study noted above, it seems that about half of tuition increase was the result of effective, if artificial, demand in the form of easy money for students. It’s certainly not because schools have gotten any better at educating their students.