Washington spends about $65 billion each year on student aid. This would be a good thing if that aid goes to students; furthering their education and helping them establish a career for the future.
But the question now is where exactly does that student aid go and how is it used?
One reason student aid has reached this high mark is because tuition rates have been climbing by an average of 5.6% each year from 2001 to 2011. That means the cost of college has increased by a whopping 56% in just 10 years, prompting the government to release more money to pay for education.
The problem here is that one study has shown that colleges eligible for federal aid charge a much higher tuition rate than schools not eligible for federal aid. This is true “across all states, samples and specifications,” according to Claudia Goldin and Stephanie Rieg Cellini – the researchers that came up with the results of the study.
And if their results are to be believed, then the difference between aid-eligible and ineligible colleges is a massive 75%.
That difference in tuition fees is something that is definitely worth thinking about. Are aid-eligible colleges truly raising tuition rates to maintain their competence and quality of education, or are they simply raising tuition fees to be eligible to receive more federal aid?
Another way by which these college corporations can increase their profits is to cut the amount of student aid they provide while offering up more federal resources to cover the slack.
Take for example Pell grants. Lesley J. Turner, Ph.D. Candidate in economics at Columbia University, analyzed how institutional aid changed as students became eligible for Pell Grants. She found that public colleges and universities garnered very little Pell money. But private – aka for profit – colleges and universities “siphoned off” a whopping 79% of all Pell grants. These schools get away with paying for colleges by covering it all up with Pell grants and tax credits; effectively putting the burden on the middle-class taxpayer instead of on themselves.
What we need to find some way to prevent colleges from raising tuition rates without due cause. Heavy-handed legal action aimed at forcing colleges to comply would be met by stiff resistance from lobbyists, so it will be up to the federal government to dictate how and where college aid goes.
In the meantime, we just have to sit tight, grit our teeth and carefully manage all college expenses in order to get a shot at a better future.