If you subsidize the price of a good, you’ll increase demand for it –and ultimately, increase the price of the good. That’s one of the basic laws of economics we all should have learned in school. If you don’t believe me, look at the ever escalating cost of attending public and private colleges and universities in this country. Earlier this week, the College Board announced that tuition and fees at public and private institutions of higher education rose at more than double the rate of inflation. Tuition and fees are up 6.6 percent from last year, and 5.7 percent from the year before, outpacing both the consumer price index and prices in the economy.
One of the biggest culprits in ever rising college costs is student aid. Has student aid really helped to make college more affordable? I’d say the opposite is true. Over the last thirty years, it has helped to increase demand and has contributed to ever rising tuition costs (See Trends in College Pricing 2007 and Trends in Student Aid 2007. Want to reduce tuition costs? Get rid of some of the frivolous student aid programs, limit student enrollment and provide alternative career tracks for the many students who would be better off elsewhere. There would be no choice but for colleges to reduce tuition. If we would only try it.