College Aid Is Corporate Welfare
Via @WalterOlson, Andrew G. Biggs writes at TheAtlantic.com, per recent econ research, that it seems that it's the colleges that are truly benefiting from all that student loan money by jacking up their tuition:
In response to rising tuition costs, federal aid such as Pell Grants, work-study programs and tuition tax credits have more than tripled over the last decade, reaching $65 billion in 2011. Washington also made over $100 billion in subsidized student loans last year. But is all this college aid actually making college more affordable? At first glance, the answer is obviously yes. But there's an alternative story, in which colleges and universities can siphon off a portion of federal education dollars. Economists would term this a question of the "incidence" of federal aid, of who ultimately benefits from it.The most obvious way that colleges might capture federal student aid is by raising tuition. Research to date has been inconclusive, but Stephanie Riegg Cellini of George Washington University and Claudia Goldin of Harvard have provided compelling new analysis. Cellini and Goldin looked at for-profit colleges, utilizing the key distinction that only some for-profit schools are eligible for federal aid. Riegg and Goldin find that that aid-eligible institutions "charge much higher tuition ... across all states, samples, and specifications," even when controlling for the content and quality of courses. The 75 percent difference in tuition between aid-eligible and ineligible for-profit colleges -- an amount comparable to average per-student federal assistance -- suggests that "institutions may indeed raise tuition to capture the maximum grant aid available."
perverse incentives are like gravity... most people don't notice, but also can't get away from it.
SwissArmyD at May 22, 2012 10:04 AM
I saw a story in the San Antonio paper on this subject yesterday:
http://www.mysanantonio.com/default/article/For-profits-lead-S-A-in-student-loan-defaults-3572803.php
The for-profit colleges and tech schools cost significantly more than a similiar program at a community college or state university... and they have a much higher rate of default on student loans. The college (Everest or ITT Tech or whatever) gets paid no matter what. Credits rarely transfer to what most people consider a "real" school. One does have to wonder what type of idiot doesn't peruse their local community college for course offerings before signing on to some certification program at a for-profit that costs ten times as much for the same thing.
ahw at May 22, 2012 11:36 AM
I went to a for-profit school in Dallas many years ago. I had been out of school so many years, it seemed, that I was scared to go back. I actually sat in a college classroom for some meeting once and felt the fear and loathing..the for-profits know how to exploit this fear and convince you it will be different there. Basically, keep your butt in the seat and they will pass you.
carol at May 22, 2012 2:18 PM
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