Complaining about rising costs, but ignoring the root of the problem is a common media mistake. And it is one ABC “World News Sunday,” made on Aug. 23 while discussing rising costs of a college education.
“College students all over the country are heading back to campus this week and for many of them their first stop is going to be the financial aid office,” “World News” anchor Dan Harris said. “In this bleak economy, there are a lot of families that cannot afford tuition and now are scrambling for last minute help.”
ABC correspondent Rachel Martin continued and said there had been a spike in applications for financial assistance.
“Colleges and universities around the country are seeing record numbers of financial aid applications and thousands of last minute appeals,” Martin said. “So now schools are scrambling to meet that demand.”
Certainly some students are struggling in the economic downturn the reason college tuition rates have spiraled higher and higher was ignored (just as reasons for spiraling health care costs go unmentioned). As Richard Vedder and Andrew Gillen explained in an op-ed for the American Enterprise Institute, government efforts to increase access to higher education have made college financial aid more readily available to students, but are functioning as subsidies to colleges and universities.
“Here are the facts,” Vedder and Gillen wrote. “In an effort to increase access to higher education, the government has been lavishing financial aid on students. The largest of these subsidies are the loan programs (primarily the federal direct and guaranteed loan programs, Perkins and PLUS), which accounted for just under 70 percent of all federal financial aid last year, according to the College Board. But there is reason to believe that these subsidies do not achieve their goal due to an unintended consequence, specifically, the incentive the subsidies give to colleges to increase their tuition.”
They explained that the subsidies in the form of student loans aren’t contributing to university efficiency or cost-effectiveness, but instead encouraging schools to “maximize the prestige” of their schoool in a non-profit or public role. According to Vedder and Gillen, hat is contributing to the out-of-control inflation of college costs.
“Most government subsidies lead to lower prices for consumers, as profit-maximizing businesses expand production to satisfy the higher demand that subsidies bring about,” Vedder and Gillen continued. “This is not the case with student loans in higher education, however, because the field is dominated by public and nonprofit institutions that seek to maximize the prestige of their institutions, not their profitability.”
That begs the question – as the federal government attempts to make health care more accessible with either a public option or non-profit co-op, will it have the same impact on medical costs as the federal government has with higher education.