MLIVE: Ken Braun: Public universities should have to tell students what they’re buying

Career College Central Summary:

  • In Amsterdam during 1624, the princely sum of 3,000 guilders was roughly equal to a year's salary for a wealthy merchant. It was also the going rate for a single Semper Augustus — a flower furiously traded by the Dutch during their infamous 17th century tulip craze. When the speculative fever broke, investors still holding overpriced blossoms rather than undervalued guilders learned that artificially pumping money into a market will cause inflation, but cannot improve value.
  • Participants in the nation's higher education bubble were sent a similar warning this week, courtesy of a new report from the New York Federal Reserve. Lawmakers overseeing Michigan's public universities and community colleges should take note and implement some changes.
  • "Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs" is the boring name attached to the frightening conclusion that government loans and grants have been dramatically and artificially inflating the price of college. For every dollar of Pell Grants given to students, the report finds "sticker price" tuition hikes of 55 cents. And worse, for every dollar taken out for a subsidized student loan, the Fed says tuition jumps upward by 65 cents.
  • The report invokes comparisons to the U.S. housing bubble that burst in 2008, and offers this summary: "From a welfare perspective, these estimates suggest that, while one would expect a student aid expansion to benefit its recipients, the subsidized loan expansion could have been to their detriment, on net, because of the sizable and offsetting tuition effect."
  • That's how stuffy government economists say the following: "Students and parents are being financially raped by this policy."
  • The federal government bears most of the blame for all this money sloshing around, and most of the substantive reforms must come from there. The Manhattan Institute think tank suggests holding the schools accountable for the performance on those loans, so that schools with poor graduation rates and/or an inability to place graduates in jobs within their field of study should find it harder to obtain loans.

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