Call to curb aid to cut fees

May 6, 2005

A movement gathering steam in the US aims to slow the growth of federal aid for students' tuition fees and to force universities to cut costs.

The logic among the economists pushing the idea is that the more the Government increases its assistance, the less the universities are motivated to reduce their prices.

Government financial aid "increases the demand for education relative to the supply", pushing prices up, Richard Vedder, a professor of economics at Ohio University and an adjunct scholar at the American Enterprise Institute, told the US House of Representatives Committee on Education and the Workforce.

Meanwhile, the continued availability of student grants does nothing to encourage universities to lower the cost of courses.

Students received $122 billion (£64 billion) in financial aid last year, most of it from the Government, up from $28.4 billion 20 years ago.

During the same period, university tuition fees have increased faster than family incomes.

"As federal and state dollars have rained down on college campuses, universities have been generous in compensating themselves," said Professor Vedder, author of Going Broke by Degree: Why College Costs Too Much . He said the pay of full professors has risen more than 50 per cent over the past 20 years and faculty have lowered their teaching loads as their salaries have grown.

Professor Vedder and similarly minded economists seem to have a sympathetic ally in the chairman of the powerful committee, Republican Congressman John Boehner. He warned universities not to expect continued big increases in government financial aid.

But others warn that without continued federal support, universities would have no option but to raise their prices even higher.

Donald Heller, a senior research associate at Pennsylvania State University's Center for the Study of Higher Education, said a 2001 study by the federal Government itself found no connection between federal financial aid and rising tuition fees.

Meanwhile, agreement is being reached on the US 2006 budget. This threatens to oblige Congress to cut spending on student loans while allocating a small amount of funds to help finance improvements to student aid as part of the Higher Education Act reauthorisation.

David Ward, president of the American Council on Education, told university presidents that the differences between House and Senate may make agreement difficult to reach, but that he expects they will find common ground.

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