Economic Education

Skyrocketing college costs

It doesn't take a Ph.D. to see that college tuition costs are skyrocketing. Data from the Census Bureau and College Board show it will cost you 202 percent more to sport a mortarboard today than it did in 1981, and during the last year alone average tuition costs have risen 9.6 percent at public four-year institutions and 5.8 percent at private schools. Government has attempted to help families foot the bill through a combination of subsidies and tax credits. But is this purported solution really part of the problem?

A recent study by Rep. Howard "Buck" McKeon (R-Calif.) and Rep. John Boehner (R-Ohio), entitled "The College Cost Crisis," reports with alarm that "though funding for the Pell Grant program has increased dramatically over the past three decades," college is becoming less affordable. The testimony of Patrick Kirby, dean of enrollment at Missouri's Westminster College, cited in the same report, suggests that because would be more accurate than though.

"Using more and more of our financial aid to offset higher tuition was a double-edged sword," Kirby told a congressional subcommittee. "Increasing financial aid led to higher tuition—which in turn created the need for more financial aid. The result was an endless spiral of increased costs, much of which was absorbed by parents and students."

Tax credits don't seem to work any better. In a working paper for the National Bureau of Economic Research, Bridget Terry Long of the Harvard Graduate School of Education concludes that educational tax credits have no discernible positive effect on enrollment. Yet "large institutional and state responses were found when examining the pricing trends of public colleges," Long writes. "Many states appear to have responded to incentives to increase the prices of colleges at which students face a low marginal cost due to the tax credits."

Perhaps Congress could use a class on the law of supply and demand.