Student Aid Is Driving up College Costs
Today we are once again treated to a declaration that there is simply no way the crazy Bennett Hypothesis — the theory that student aid helps fuel college price inflation — is true. This time, the end-all-debate pronouncement comes from David L. Warren, president of the National Association of Independent Colleges and Universities, who cites three apparently definitive reports as proving aid is not “driving up” costs.
Aside from the problem that the argument is really that aid fuels price increases rather than driving them — the aid is the gasoline, the colleges the car drivers — what do the studies offered by Warren really tell us?
First is the 2001 federal report everyone who wants to declare the Bennett Hypothesis dead loves to cite: “Study of College Costs and Prices, 1988-89 to 1997-98,” from the National Center for Educational Statistics. As Warren accurately cites, the report does say:
Regarding the relation between financial aid and tuition, the regression models found no associations between most of the aid packaging variables (federal grants, state grants, and loans) and changes in tuition in either the public or private not-for-profit sectors.
But, then, it also says this:
[T]here are considerable data limitations in these models: for example, the availability of only one year of financial aid data and a lack of comparably recent financial data (especially for private not-for-profit institutions). IPSFA data on loans include all sources of student loans; federal subsidizedand unsubsidized, institutional, and private loans cannot be disaggregated. In addition, the IPSFA aid variables focus on the packaging of various forms of student aid in terms of the percentage of students receiving aid and the average amount received, and therefore cannot be used to explore the possibility of a revenue interaction at the institutional level between federal aid and institutional aid. Due in large part to the accounting standards used by the institutions themselves, information on financial aid collected through the IPEDS system for the available years is incomplete, especially regarding student loan volume, which cannot be isolated
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