Obama Plan to Make College Affordable Will Raise Costs

This week, President Obama is hitting the road to unveil his plan to “combat the soaring costs of higher education.” His three part plan consists of connecting financial aid to school performance, supporting academic innovation, and making college more affordable.  

His road tour and policy initiatives sound good in the nightly news cycle. They make for great talking points, but President Obama’s plan does not address the fundamental reasons behind why tuition is rising. Both sides can agree that rising college costs are a big problem and burden for students.  But more college subsidies and government aid will not solve the problem; in fact it is the reason why tuition is rising.  

Over the past thirty years tuition has risen by over 250%, despite Washington continually putting forth new government aid programs and subsides with the attempt to cut tuition costs. The more money Washington puts into the hands of students only enables the colleges and universities to continue propping up the price of education.

When students have access to low-interest loans and government aid, colleges have no incentive to cut costs. Why should a college lower tuition if more students are able to pay with subsidized loans from the government?

Neal McCluskey, associate director of the Cato Institute said, “Basically the aid ensures that students can pay almost anything they are charged.”  Universities have no reason to lower tuition because they know whatever sticker price they put on a college degree, there will be students ready to take out low interest loans to pay for it.

According to the National Center for Education Statistics, 71% of all undergraduate students received some type of financial aid in the 2011-2012 academic year, up from 66% in 2007/2008. The average amount also grew from 9,000 to 10,800 in just four years.

Nowhere in President Obama’s plan does he talk about cutting back on aid or low interest loans to students. There is also a deeper problem with the entire cost of college debate. We need to ask ourselves: Is college for everyone? 

In 2012, a Harvard study was released that showed only 56% of all students who enter college will graduate within six years. Forty-six percent of all students who enter college will not graduate, yet many members of congress are pushing for increased government aid and programs to allow more people to go to college.  

The narrative needs to be personalized for each student and individual. Yes, college tuition is a problem for many young Americans, but it is a problem exacerbated by government subsidies and an overwhelming demand to get a college degree, despite high dropout rates.

Subsidies and grants throw off the natural market signals that are supposed to allow students to make informed decisions on the true value of a college degree. Increasing aid, and expanding subsidies only intensifies the problem which will lead us down a path of more college dropouts and a continuation of skyrocketing tuition.