School Information System: As Student Debt Grows, Possible Link Seen Between Federal Aid and Rising Tuition

June 12, 2012

As Student Debt Grows, Possible Link Seen Between Federal Aid and Rising Tuition

Rising student debt levels and fresh academic research have brought greater scrutiny to the question of whether the federal government's expanding student-aid programs are driving up college tuition.

Studies of the relationship between increasing aid and climbing prices at nonprofit four-year colleges found mixed results, ranging from no link to a strong causal connection. But fresh academic research supports the idea that student aid in the form of grants leads to higher prices at for-profit schools, a small segment of postsecondary education.

The new study found that tuition at for-profit schools where students receive federal aid was 75% higher than at comparable for-profit schools whose students don't receive any aid. Aid-eligible institutions need to be accredited by the Education Department, licensed by the state and meet other standards such as a maximum rate of default by students on federal loans.

Posted by Jim Zellmer at June 12, 2012 2:23 AM
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Comments

Why is this a surprise? Aren't all prices and cost elastic; supply and demand. Don't all prices go up if there is more money promised? Same with health care, same with housing prices, same with stock market, movie prices, food prices, gas prices, wages, CEO salaries, political campaigns.

I would have expected all economists, regardless of flavor, to at least agree with that.

Posted by: Larry Winkler at June 17, 2012 9:27 PM