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A new report by the Federal Reserve Bank of New York has found that the massive investment in grants and student loans by the federal government is a major contributor to the unbridled growth in the cost of attending college.
College tuition rates have consistently risen faster than inflation for some 25 years. One theory for the rise, dubbed the “Bennett hypothesis,” was put forward by Ronald Reagan secretary of education William Bennett, who argued that hikes in government student aid simply gave colleges a free pass to hike tuition.
Now, the New York Fed’s research suggests there’s some merit to the idea, and that it means the government could be spending billions on education to no effect.
“While one would expect a student aid expansion to benefit recipients, the subsidized loan expansion could have been to their detriment, on net, because of the sizable and offsetting tuition effect,” the paper concludes.
On average, the report finds, each additional dollar in government financial aid translated to a tuition hike of about 65 percent. That indicates that the biggest direct beneficiaries of federal aid are schools, rather than the students hoping to attend them.
Government creates and exacerbates problems.
Let the market and competition decide tuition and watch it plummet.
No surprise, really. We watched the same thing happen with orthodontics in California when Medicaide starting covering basically cosmetic braces. Within 5 years the costs rose there at a significantly higher rate than the rest of the nation and it became almost double the cost than in other states.
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Originally Posted by Oldhag1
No surprise, really. We watched the same thing happen with orthodontics in California when Medicaide starting covering basically cosmetic braces. Within 5 years the costs rose there at a significantly higher rate than the rest of the nation and it became almost double the cost than in other states.
Seems like we've been watching a similar rise in the defense budget and the cost of implements of war also.
This is not only true for subsidized education but everything the government subsidizes. I was involved in another (private) study that came to the same conclusion on long-term transient housing (rental) prices. The more the government subsidized the bottom of the market, the more prices rose for everybody. Since the bottom is largely subsidized and the rich are doing just fine, the impact is mostly felt by the middle class.
Perhaps the studies should concentrate on why we continue the same policies when they have been shown to fail. Or better yet, how have we been able to convince a nation that the rich are the cause of our middle class problems when it is the government all along.
This is not only true for subsidized education but everything the government subsidizes. I was involved in another (private) study that came to the same conclusion on long-term transient housing (rental) prices. The more the government subsidized the bottom of the market, the more prices rose for everybody. Since the bottom is largely subsidized and the rich are doing just fine, the impact is mostly felt by the middle class.
Perhaps the studies should concentrate on why we continue the same policies when they have been shown to fail. Or better yet, how have we been able to convince a nation that the rich are the cause of our middle class problems when it is the government all along.
Proof is there before them and they will still deny it.
Government Subsidizes in the name of helping the poor ---> Boom (now the middle class can't afford it)
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