In 1987 President Reagan’s Education Secretary Bill Bennett said the constant increases in the costs of college are correlated to the increase in student aid. This became known as the “Bennet Hypothesis.” From the National Review:
Since the government was putting many dollars in the pockets of high-school grads which they could use only if they enrolled in an accredited college, it stood to reason that the people who ran the colleges would see the opportunity to capture many of those dollars for their own spending desires by increasing tuition and fees. While some leftists dismissed the idea (“College presidents aren’t like greedy businessmen!”) those who have carefully analyzed the connection between student aid and rising costs have largely come to the conclusion that Bennett had it right.
Now the James G. Center for Academic Renewal has studied the Bennet Hypothesis and proven it to be correct.
The theory is really just common sense. If the government gives money to students to spend on education, then students will be able and willing to spend more on that product. Universities, knowing that the funds are available, raise tuition without worrying about whether students can afford it. An ugly cycle ensues.
And now, we’re seeing the effects. The price of college tuition and fees has risen 1,335 percent since 1978: much faster than inflation and faster even than medical care (704 percent) and housing (511 percent). Too many students go to college for the wrong reasons and too few graduate. Almost 4 million students dropped out of college with debt in 2015 and 2016. Student borrowing has soared to more than $1 trillion with many graduates (and non-graduates) unable to pay back their student loans.
The author of the study, Jenna A. Robinson, looked at 25 peer-reviewed studies on the Bennett Hypothesis, concluding:
Taken as a whole, the scholarly research I examined suggests that federal student aid increases university tuition rates, perhaps by as much as 60 cents on the dollar. Of the 25 studies surveyed, a majority found some effect of federal subsidies on the price of higher education in at least one segment of the higher education market. The effect was most pronounced at for-profit institutions….
In short, student borrowing is on an unsustainable path. Understanding the Bennett Hypothesis and examining the evidence is the first step in getting back on course.
13 comments
Something must be done about this – or perhaps; something must be ‘undone’ about this.. Senator De Steph had a related bill last year, wish he could have contributed here
Interestingly, Joe Biden actually mentioned this problem a couple of years ago. He understood that student aid was a cost driver – and the colleges and universities took advantage to raise tuition without bearing adverse consequences for the institutions. Now we have a situation where there is something like a trillion dollars worth of student debt which is having an adverse impact on young people starting out. They have burdened themselves with sufficient debt that they cannot buy houses and start families. It should be little surprise that such young people are living at home rather than venturing out into the world where their future should be.
Biden: By the way, government subsidies have impacted upon rising
tuition costs. It’s a conundrum here. But if we went the rate your view
of the free market route what we would have done is we would have not of
done that. We would not have increased pell grants, for example. And
there would be 9 million fewer students in college today.
And there would be hundreds of thousands and millions of students who
would not be in college who don’t get Pell grants because there was no
ability for them to borrow money through Perkins loans and/or have the
tax deduction.
So you are right, in a pure free-market the college tuition would have
to be lower because there would be fewer people going to school, they
wouldn’t have as much coming in. But the end result is we would probably
have — we go for the better part, half a generation, of going 16th in
the world maybe down to 20th in the world.
https://www.realclearpolitics.com/video/2012/02/06/biden_admits_government_subsidies_have_increased_college_tuition.html
Maybe we should have fewer young people in four year colleges and universities where they seem to be getting little of use to a productive future. If you think all these “Social Justice” type courses lead to a productive future, I point out the that ANTIFA and BLM are the result. I constantly advise kids to go to 2 year skill based colleges like ECPI, get an associates degree, and then go from there. If they want another avenue, then a stint in the military (where you can take courses on a base anywhere in the world or at sea) or even taking a job at a minimum wage and working up the ladder for a few year.
As far as free-markets and college tuition, the internet and distance learning are already having an impact on costs and some colleges are offering a guaranteed cost for a 4 years bachelor degree so a potential student can decide whether $10K or $100K is an appropriate price for themselves and their families. In ten years, only a very few prestigious universities will be able to charge whatever the traffic will bear. The rest will have to become innovative – and that innovation is through the internet.
We have committed multiple sins. We’ve been destroying the connection between perseverance, hard work and family to do for oneself and loved ones. We have created an inviting alternative for kids who would be better served in technical schools or specialized training ,(or the best “school” we have – our Armed Forces) to instead end up at a dead end, heavily in debt with little to offer. Finally, we have paid for a “system” that sinks into deeper and deeper mediocrity while paying wildly exorbitant salaries to Administrators and senior academics without the rigorous hand of the free market – or just plain common sense – to discipline its appetite. It is little wonder that 90% plus vote Democrat and push radical hard core Marxism. I think not.
Yes – 2 guaranteed sources income (wealthy who don’t care what it costs and those on aid who don’t care what it costs) cut out those in the middle. Colleges can charge whatever they want and don’t have to compete for students. This is the root of astronomical costs. On top of that, I believe the “student aid” has strings attached. Colleges seem to have unified, leftist messages way too often.
All true, and the worst part is not just the cost increase; it is the crippling effect on young lives. Free money, combined with societal pressure to attend college whether prepared or not, has created a tsunami of unprepared graduates. The four-year party ends when graduates cannot find employers to pay high salaries for the questionable degrees conferred upon them. It’s no wonder we see this strange sense of entitlement in this generation, with massive debt they cannot repay, and bitterness about the false promises made to them.
…but they still think socialism sounds great.
A request: Could you name anyone on aid “who don’t care what it costs”?
Just one. Please.
I would ask for the name of a college that “can charge whatever they want and don’t have to compete for students” and pray you cite a public school so we don’t have to ask you why you believe in price controls for a private enterprise.
Me? It seems competitive to me with some colleges failing or merging, especially with less foreign students. Competition is of course the salve for control, obviating the need for intervention. So if you are inclined to grant me one more request, it would be to have you identify where there are colleges with no competition.
People with unlimited resources don’t care what it costs. People on huge amounts of financial aid don’t care what it costs, unless they only get loan options. It’s like going to the ER for a sore throat without insurance – people don’t care what it costs because they’re not paying and ER’s can’t refuse care. Again, financial aid in it’s overly generous-federal-government-involvement is driving up the costs. For example, Vanderbilt was $40,000 in 2003 and was close to $60,000 in 2010. We know that because of experience. Incomes don’t rise at that level and every university has more than enough money to build over the top student centers.
They don’t care what the ER charges because emergency rooms are monopolies, especially when you are sitting in one awaiting treatment:
https://www.vox.com/health-care/2017/12/4/16679686/emergency-room-facility-fee-monopolies
I repeat: Can you name anyone on aid “who don’t care what it costs”?
All colleges compete for enrollment. There are no cost, no tuition, no fee alternatives, such as Berea College. Options abound with many approaches.
Your confusion is noted: Vanderbilt tuition is currently at 44k:
https://www.google.com/search?q=Vanderbilt+tuition
But then you knew that because of experience, right?
Andrew:
I am throwing the penalty flag on your comment. The call is premature sarcasm.
AnninVA26 never stated that Vaderbilt’s tuition was $60,000. He or she stated that “Vanderbilt was … ” leaving it open to interpretation whether the statement related to tuition or total cost of attendance.
From Vanderbilt’s web site …
“Vanderbilt University Tuition Summary. Tuition and fees at Vanderbilt University are $44,712 USD without financial aid. With room, board, and other fees combined, total cost of attendance is $63,532 USD.”
I accept that flag! Call ’em as you see ’em.
Although I never include the extra costs alongside the tuition as they are generally borne whether one attends college or not. Room and board are constants in life.
Finally, were those sames costs included in the prior cost estimate? Equally unclear.
A good lesson: Reserve sarcasm for extreme clarity. Much respect for your remarks here. It is part of why I return.