New Study on Higher Education Aid

November 13, 2015
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The U.S. Department of Education spends tens of billions of dollars a year on subsidies for higher education. Federal Pell grants are more than $30 billion a year, federal student loans are about $100 billion a year, and grants to colleges and universities are $2.5 billion a year.

College aid is growing rapidly, which is imposing a rising burden on taxpayers. And the subsidies create numerous harmful effects, as Neal McCluskey and I discuss in our new study posted at Downsizing Government.

A key concern is that government money comes with government control. There is increasing pressure to top-down plan America’s higher education system from Washington. As we’ve seen with health care, K-12 schools, disaster aid, transportation, school lunches, and many other activities, federal subsidies invariable end up being the vehicle for central planning.  

This is a big threat to the future of higher education, as our study explains. When the subsidies start flowing, the do-gooders in Washington just can’t keep their hands off. Regulatory manipulation is just too tempting for the politicians and bureaucrats, who hide their big-government impulses behind conservative-sounding phrases such as “standards” and “accountability.”

Even with its problems, the American postsecondary education system is the best in the world. Driven by consumer choice and competition between independent institutions, it has an unmatched vibrancy. However, increasing federal control and subsidization from Washington is creating a serious threat.

Efforts by the current and prior administrations to micromanage accreditation and other aspects of higher education threaten to undermine the system’s diversity and flexibility. The waste and bureaucracy of top-down federal control is exemplified by the regulatory juggernaut of education’s Title IX, the gender discrimination rules.

As we conclude in our study, the best way to avert rising central planning is to cut, and ultimately end, federal subsidies for higher education.

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