It
is more expensive than ever to be able to afford a college education. Tuition
rates at an average 4 year institution has risen 146% over the last 30 years. There are many causes affecting the increase of tuition
but many generally believe that federal subsidies help offset the cost and
makes attaining a post-secondary education affordable. While this assistance
does allow those who were previously unable to pursue a degree, it also enables
the institution to raise the tuition rate.
Colleges
are using the basic economic model of supply and demand in order to justify
rises in tuition. The reasoning being used is that cost must be high in order
to keep the demand for higher education at a manageable level that they can
supply. Federal grant programs are extremely attractive to students as it is
money that does not need to be paid back and they are awarded to those with a
genuine financial need. So when the government increases the amount
of aid to be awarded through the Pell Grant or the Federal Supplemental
Education Opportunity Grant, more students are likely to attend college. Since
the money that is paying for it is awarded to the student, they are more likely
to accept higher costs than they would if they were using their own money.
Colleges use this to their advantage and charge a premium for their services.
As
federal grants do not provide enough funds to cover the entire cost of tuition
students turn to loans to cover the rest. The government offers low-interest
loans to those who qualify. The most popular program that is available is the
William D. Ford Federal Direct Loan (Direct Loan) Program. Under this program
there are four types of loans that a student may receive and they are: direct
subsidized loans, which are awarded to students who require additional
financial assistance as the interest on these loans are paid by the government
during the time of study; direct unsubsidized loan, which are awarded to any
qualifying student to cover educational costs; direct PLUS loans, which are
given to graduate and professional students as well as parents of dependent
students; and direct consolidation loan, which group all the loans a student
might have under a single lender. From 2004 to 2013
debt from student loans has increased by 281%. The increased borrowing at
artificially low interest rates creates a student loan bubble that is
reminiscent of the housing bubble that led to the great recession. Therefore not only are students graduating with more debt than they
would otherwise, but this model has been proven as unstable and could cause
greater harm in the future.
The
other forms of federal assistance with higher education is tax credits and the
work study program. There are two credits that are currently being offered: the
American Opportunity Credit and the Lifetime Learning Credit. These credits can
give up to $2,500 back to a qualified student. The
work study program is offered to students who have a financial need and is
awarded in a first-come first-serve basis. The individual would only be able to
work the awarded hours and in a field that is relevant to their degree.
Each
type of assistance is a worthy endeavor and has the potential to help better an
individual’s life. However they do not address the fundamental problem of
colleges charging exorbitant fees to their students. A type of federal
assistance that helps stem the cost of tuition is a tuition freeze. This is
when state officials promise funding to a public college as long as they
promise to not raise tuition costs. In order for the government
to truly help alleviate the burden of the expense of a college degree they must
demand transparency from the institution regarding their accounting process.
Post-secondary institutions should not be allowed to raise tuition as they
please because more students are suddenly able to pay for it through federal
subsidies.
References
Burke,
L. (2010). Pell Grant Increase Would Not Solve the College Cost Problem. The
Heritage Foundation. Retrieved from: http://www.heritage.org/research/reports/2010/11/pell-grant-increase-would-not-solve-the-college-cost-problem?query=Pell+Grant+Increase+Would+Not+Solve+the+College+Cost+Problem
College
Board. (2015). Average Rates of Growth of Published Charges by Decade.
Retrieved from: http://trends.collegeboard.org/college-pricing/figures-tables/average-rates-growth-published-charges-decade
de
Rugy, V. (2013). Subsidized Loans Drive College Tuition, Student Debt to Record
Levels. Mercatus Center. Retrieved from: http://mercatus.org/expert_commentary/subsidized-loans-drive-college-tuition-student-debt-record-levels
Federal
Student Aid. (n.d., a). Grants and scholarships are free money to help pay for
college or career school. Retrieved from: https://studentaid.ed.gov/types/grants-scholarships
Federal
Student Aid. (n.d., b). Federal student
loans for college or career school are an investment in your future. Retrieved
from: https://studentaid.ed.gov/types/loans
Federal
Student Aid. (n.d., c). The U.S. Department of Education offers low-interest
loans to eligible students to help cover the cost of college or career school.
Retrieved from: https://studentaid.ed.gov/types/loans/subsidized-unsubsidized
Federal
Student Aid. (n.d., d). Did you know that the Internal Revenue Service (IRS)
provides tax benefits for education? Retrieved from: https://studentaid.ed.gov/types/tax-benefits
Federal
Student Aid. (n.d., e). Federal Work-Study jobs help students earn money to pay
for college or career school. Retrieved from: https://studentaid.ed.gov/types/work-study
Healy,
K. (2013). Tuition Freezes May Help Public University Students. College Xpress.
Retrieved from: http://www.collegexpress.com/interests/public-colleges-and-universities/blog/tuition-freezes-may-help-public-university-students/
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