Higher education is a conglomeration of state and private institutions. What unites them all is a dependency on federal government funding. Don’t be fooled by the “student” in student loans. All of the tuition loan money goes directly to colleges to use whatever way they want. Why is the government subsidizing not only public but also private institutions? Are they really private when the government’s transfer is the biggest component of their tuition revenues? Is it time to ween private colleges, both for-profit and traditional, from the student loan subsidy?
Like all government subsidies that last over decades, the student loan program has distorted the behavior of colleges. No longer just a facility to help low- to middle-income students, it has grown in size and dependability into what colleges see as their right. This perceived right has extended to their constantly raising tuition, knowing that the government will cover a large portion of the increase. The subsidy has crept into their revenues like a virus, inviting them to grow their expenditures to equal its size.
Yes, they fundraise furiously, and some have huge endowments. Together, the subsidy and fundraising revenues exist side by side in college financial statements. For example, government data shows Boston University took in $255 million in federal subsidy last year, and at the same time, it raised $242 million in gifts. Private colleges in Boston, as an example, all have endowments well above $1 billion yet still receive substantial subsidies from the student loan program driven by their constant tuition hikes. They have the financial strength to adjust to a gradual removal of student loan subsidies.
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