“Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs” is a study by economists at the New York Fed on what percentage of tax dollars that were supposed to subsidize students actually ended up subsidizing colleges instead (because they could raise their tuition by more than 100% of the subsidy). They don’t look at the other folks who get rich off Federal student aid: lenders who provide student loans are fairly high interest rates yet in fact incur no risk because they can get more tax dollars if the students don’t pay.
For those interested in just how paralyzed and ineffective Americans can be when it comes to clear thinking about public policy, the study references a 1987 New York Times article by the Secretary of Education at the time (William Bennett). More than 30 years ago Bennett figured out that the subsidies helped colleges, not students, and that even if they were redesigned to help students it didn’t make sense to provide unlimited federal funds: “the chief beneficiaries of a college education are the students. On average, college graduates earn $640,000 more over their lifetimes than nongraduates do. It is simply not fair to ask taxpayers, many of whom do not go to college, to pay more than their fair share of the tuition burden.”
Related:
How can you say the higher tuition only benefits the university? Have you seen the new rec center?