Despite research that shows government-funded student aid causes tuition hikes, Hillary Clinton is set to double-down and propose an expensive federal student aid program.
Clinton is unveiling a $350 billion plan Monday that would still require families to pay for tuition, but would eliminate the need for students to take out loans to attend public colleges.
With out-of-pocket costs rising much faster than inflation, the rising price of tuition is clearly an issue. But a new study suggests that Clinton’s proposal would make the tuition problem worse, not better.
“We’re feeding the tuition problem with all the subsidies,” Douglas Holtz-Eakin, president of the American Action Forum, told the Washington Examiner. “The fundamental problem is the cost of college, not how it’s financed: debt versus not debt. This is not a plan that does anything about the cost of college.”
Research published in July by the Federal Reserve Bank of New York shows that increasing student aid leads to rising tuition. “While one would expect a student aid expansion to benefit recipients, the subsidized loan expansion could have been to their detriment, on net, because of the sizable and offsetting tuition effect,” the study said, as reported by the Examiner’s Joseph Lawler.
The Clinton plan would give grants to states in exchange for states spending more taxpayer money on colleges. “They’re just recreating the Medicaid expansion problem,” Holtz-Eakin said. “It will be Obamacare for higher education,” he wrote in a blog post Monday. “All that is missing is the individual mandate.”
Clinton’s plan would also expand the federal role in higher education by attaching strings to the new funds. A certain portion of total spending would be required to be used on instruction, in an attempt to limit spending on administration or student amenities. “They’re micromanaging every public university in the United States,” Holtz-Eakin told the Examiner.
The plan would also require expanded bureaucracy and paperwork for families. “It’s a nightmare in terms of the regulatory costs it’s going to end up imposing,” Holtz-Eakin said. The plan would cap tuition payments at a level the government says the family could afford without borrowing money. “They’re going to regulate every family’s budget to see if they’re really spending their money wisely and make sure they don’t have to borrow to go to college.”
To pay for the plan, Clinton would raise taxes on the rich. Specifically, the Clinton plan would limit the value of itemized deductions that wealthy families can claim — a move that will not go over well in the world of charitable non-profits. It means that organizations helping the homeless, food banks and inner-city education programs (to name a few examples) would surely suffer from tens of billions in reduced donations just so that some students’ debt would be lower.
Holtz-Eakin recommended a few other reforms that would actually lower the cost of college. “Step number one: reform Pell Grants to be targeted on genuinely needy low-income individuals. Don’t let it creep into the middle-class,” he said.
Holtz-Eakin also stressed the importance of ensuring high school graduates are college-ready. “If you want to find somebody with a lot of student debt, find someone who didn’t finish college,” he said. “And if you find someone who didn’t finish, find someone who needs remedial help the day they show up. This does nothing to fix this problem.”
He added that stronger economic growth in general will also help fix the student debt issue. “Student debt’s a problem because the economy stinks,” he said. “Let’s stop having bad economic policy and give people real incomes … so they can go to college.”
