The glut of government aid for college students has allowed colleges to jack up prices, but it also threatens their long-term sustainability.
As philanthropist Bob Hildreth told the Boston Globe, colleges have designed admissions around how they can get the most federal funding for students. That’s disadvantaged poor students who could otherwise succeed in higher education.
“On average, colleges depend on 30 to 50 percent of their tuition income coming from one source — the federal government through student debt,” Hildreth said. “Knowing that they have that wind at their back, colleges can increase tuition every year by 3 to 4 percent. They do it because they know loan debt isn’t their problem. That’s no way to be a financially responsible institution.”
Hildreth has tried to combat that by establishing a nonprofit to help low-income families save for college, but it’s not something that will stop “the mushrooming student-loan crisis.”
So long as enrollments keep up, raising tuition and fees push up student debt without cutting into a college’s funding. Colleges lack internal pressure to rein in costs. Thus, the federal checks keep clearing and economic prudence is less than an afterthought.
The high cost isn’t spurred by federal funding alone. Student choice and demand shares responsibility.
“We’ve created a totally different system of private and public colleges that are supported through endowments and alumni that have huge impact on the decisions that college make. In Europe, it’s the government that makes all the decisions about colleges,” Hildreth said.
Given the many choices students have, colleges cater to them in everything except cost. If students want high-quality food, a world-class recreation center, and an army of bureaucrats to order everything, they’ll get it. Along with the bill.
Colleges have job titles for every conceivable position except “director of cost cutting.” With how the federal government awards education aid, it’s not surprising. Colleges have no incentives to reduce costs — to keep students happy and enrollments up, saying no to new spending projects could harm them.
That’s left many students in a situation where they’ve become too poor to afford college, but too wealthy for financial aid.
The political debate has ignored those realities so far. Most proposals benefit already wealthy students. A college debate between Hillary Clinton and Donald Trump could spark a real debate on the merits of government in the student loan business, but it would be the first. For now, the structure provides the foundation for the college cost spiral.
