Wednesday, November 18, 2009

Why College Financial Aid Might Be A Bad Idea

From the Hartford (CT) Courant:

Not long ago I got into it with the YouTube investment wizard and U.S. Senate candidate Peter Schiff over college loans and the ever-increasing price of tuition.

The impish Schiff — who predicted the current economic collapse — hit me with a simple explanation to a question I cannot find an answer for: It's the government's fault for handing out so much money through loans and grants.

No government bailout, Schiffian logic goes, no inflated tuition.

While it's not that easy, there's a significant amount of truth to what he says. Schools know that most students are going to get some kind of government financial aid, so they raise tuition--why not? They get the money!

In what areas of the economy have prices been rising significantly higher than the inflation rate for several years? Health care and higher education. In which two areas of the economy is government heavily involved, skewing the market? Health care and higher education.

The correlation is not coincidental.


allen (in Michigan) said...

And neither is the desire to believe that, maybe this time, it might be possible to get something for nothing.

Darren said...

I don't understand what you mean here.

Ellen K said...

When the state of Texas allowed the universities to set their own tuition, it was like kids in a candy store. Suddenly, the state tuition plan couldn't sustain the increase and now the state is opting out. I know kids whose parents decided that working during college would spoil their experience. Some of them have $100K in loans. And since the economy isn't producing jobs for these grads, they are now struggling to find grad school programs and jacking up more loans. At some point people are simply going to default. When you own as much on a school loan as you would on a starter home, then the balance is skewed. And when students must pay more if they take longer than four years, which means they must work more hours and pay more money. At some point, these young people-many of whom were bright first voters last year-will realize that bills eventually come due. I wonder what their personal politics will be then?