New Tune, Same Stupid Key

Well, it had to happen sometime. Faced with a thoughtful, responsive piece of federal legislation to reform the financial aid system, some ideologue had to come forward with a proposal to end federal student aid entirely. Yep, you heard me right-- get rid of financial aid. Throw out the baby with the bathwater.

The Chronicle is reporting that a director of the Cato Institute's Center for Education Freedom -- aka the freedom not to be helped by the government-- is purporting that "student aid explains the pain" of rising tuition. This "higher education expert" (honestly, some people are way too kind) argues that phasing out aid will make colleges more responsive to people who pay "with their own money."

Too bad this expert, Neal McCluskey, didn't bother to do his homework. If he'd cracked a book, he would've learned--fast-- how wrong he is. Not to mention unoriginal. Back in 1987 then-Secretary of Education Bill Bennett made the same argument in a New York Times op-ed titled "Our Greedy Colleges." And economists including Ron Ehrenberg, Caroline Hoxby, and Sandy Baum flatly rejected it--on empirical grounds-- as simplistic and ideologically convenient (much as Kevin Carey apparently did today). Since that time, plenty of studies have tested the hypothesis. As one (real) expert, Harvard's Bridget Terry Long, puts it, "Of the many studies that have tried to identify whether colleges react to federal financial aid, most find little to no response. While several studies do find a college price response, their overall results are mixed and often contradictory. In summary, none of the numerous studies on the subject have found a "smoking gun" in terms of college pricing behavior....the fact that these two trends (rising tuition and rising aid) move in similar directions does not mean that one caused the other." Heck, even Rich Vedder's shop has moved past the simplicity of the idea, instead developing a (somewhat) more nuanced twist in which aid contributes to rising spending, not rising tuition (the latter could occur, but isn't inevitable).

Yet the Bennett hypothesis keeps on rearing its ugly head. I think after more than 20 years of this nonsense it's time to call the idea what it is-- just plain stupid-- and stop giving ink to the people who repeat it.

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The Perils of Group-Think

With the President imploring more Americans to go to college and not give up on themselves or their nation, it's understandable that many policymakers want to join in and do their part. Making college more affordable is a very good place to start.

And free tuition-- heck, free anything--sounds great, especially in a recession. Free tuition provided without changes to the state's operating budget or cuts to any other programs, or by digging a deeper deficit, sounds even better. That's probably why Michigan state representative Fred Durhal Jr. thinks he's got a good thing going, proposing to use a new lottery and casino profits to provide free tuition to more than 160,000 students. It's a win-win right? Says Durhal, "You can feel a little better about losing money to the house if you know it's going to go to children."

Except that the money you are losing is being taken from your own children, and given to someone else's. And, since only students who've lived in Michigan continuously for 5 years and earned a 2.5 GPA or better are eligible, the person losing the money is far more likely to be relatively poor, while the kids getting the money are likely to be relatively rich. Let's think-- who moves around a lot and is far less likely to meet that GPA requirement...? Hmmm...

A basic tenet of good social policy-making is targeting. If you want to help students who right now can't afford college, then you need to set the requirements such that they are the (only) ones who are eligible. Not doing so means spreading the wealth among those who don't really need it, diluting the potential impact. And if you really want to help disadvantaged families then don't use a funding mechanism that draws the cash from the program right out of their pockets.

Michigan can look to many other states for better ideas, and for lessons on why this one is a poor one. Take a look at who has benefited from Georgia's lottery-funded HOPE scholarship, which also includes a GPA cutoff. According to expert Don Heller, over 90% of the expenditures have gone to students who would've attended college even without the financial assistance. As long as a scholarship is tied to a GPA cutoff, and family income is correlated with GPAs, then such programs won't effectively reach their intended audience. As long as poor folk dominate those playing the lotto and visiting the casinos, then that funding mechanism doesn't work either.

I'm as pleased as punch that people want to help more poor kids afford college. That's an idea worth glomming on to. But policy proposals require more than good ideas, they require carefully thought out details and a strong theory of action. This one just doesn't cut it.

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