But You Can’t Cut MY Benefit!

My twitter feed is currently clotted with Tweets not to cut Pell Grants in the deficit talks (yes, I do have some liberal friends).

Two things: First, pretty much everything is going to take a cut if we’re going to avoid going the Greek route.  Second, there’s a good case to be made that federal aid actually drives up college costs.  It’s called the Bennett hypothesis.  Basically, as the feds provide more money for students to spend, the colleges raise their rates to capture the extra available money.  It’s a warped version of supply and demand – one charges what the market will bear, and the feds enable the market to bear a heck of a lot more than it naturally would.  While no one has been able to prove the hypothesis, even its detractors admit there appears to be a correlation between aid and college increase costs.

From the Center for College Affordability:

A representative sample from the literature:

McPherson and Schapiro

“We found no evidence of the “Bennett Hypothesis,” [at private institutions]… We did, however, find that public four-year institutions tended to raise tuition by $50 for every $100 increase in federal student aid.”

Rizzo and Ehrenberg

“Estimates of the size of this “Bennett Hypothesis” at public institutions range from negligible to a $50 increase in tuition for every $100 increase in aid.”

College costs have been increasing at twice the average inflation rate, so something is going on.  Can I prove Bennett is right?  No.  But I do wish the government would do students (and their parents) a favor and stop “helping” so much.

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About Mystic Cowgirl

I worked overseas in the aid game for longer than I'd like to admit and learned several important things: 1) Third World countries aren't poor because America is rich. They're impoverished due to socialist governments that provide neither rule of law nor basic infrastructures; 2) These socialist governments redistribute wealth from taxpayers to the government workers. There's no benefit to the poor or downtrodden, and certainly not to the general welfare in terms of infrastructure improvements. 3) America is moving toward the Third World model. Rule of law has been subverted because equality under the law is disappearing as special interests carve out exemptions to regulations and special favors under the law. The redistribution of wealth to government began decades ago -- total compensation for government employees now outpaces salaries in the private sector.
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