The Health Care and Education Reconciliation Act, which Pres. Obama signed Tuesday at Northern Virginia Community College, “stripped” banks of their privileged status as intermediaries for federal student loan money and increased the amount of federal Pell Grant awards. It also gave colleges and universities across the country every reason to jack their prices through the roof.
Neal McCluskey at Cato praised the student-lending language in the bill as a none-too-soon departure from a system that previously allowed private lenders to make big bucks writing and servicing federal loans while assuming none of the risk.
But as McCluskey points out, the bill will continue to inflate the cost of higher education. Think live-camera feeds on the student quad meant to provide a glimpse into how good a time everyone is having; dining hall sushi for a more multicultural experience; on-campus concerts by big names so that students never have to leave campus; top-of-the-line amenities that give students a sense that they’re staying at the Ritz, not resident Hall A; and a million other pieces of campus life paraphernalia that colleges and universities have been buying for years and will continue to buy with federal loan money.
Oh, and those amenities paid for with federal dollars include non-faculty personnel, like loan counselors whose sole job is to talk students into applying for and securing the maximum amount of…federal dollars.
Obama is not oblivious to the aforementioned game. Towards the end of his remarks, the president said, “We continue to expect colleges and universities to do their part to hold down tuition increases. That has to happen. We’ve got to work on that.”
But it’s unlikely Obama actually means that. Setting price controls at private and state institutions would be disastrous, insisting that federal dollars be spent only on tuition wouldn’t prevent colleges from building non-academic fees into tuition, and yanking federal subsidies (the simplest and smartest solution to all of this), just ain’t going to happen.