Washington, DC –The Center for College Affordability and Productivity is pleased to announce the release of How College Pricing Undermines Financial Aid, by Robert E. Martin and Andrew Gillen. Analyzing college pricing decisions, this study explains how college pricing renders most financial aid programs ineffective as a tool for increasing college affordability.
Despite vast increases in financial aid over the years, the cost of attending college has continued to soar. The main finding is that colleges often deliberately raise their prices when aid is available, in essence "capturing" the aid. The end result is that higher financial aid does not produce an improvement in college affordability. Other conclusions include the following:
To demonstrate the negative impact of this dysfunctional financial aid system, the study considers the hypothetical benefit to students if all aid was used to lower the financial burden for students rather than being captured by colleges. Under such a scenario:
The extra $59 billion that colleges are spending as a result of capturing financial aid and other income is mostly used to finance reductions in faculty and staff productivity in the form of low teaching loads and bloated administrative staffs. The authors conclude that, in effect, “[h]igher education is engaged in an expenditure ‘arms race’ that thwarts policies to increase public access and redistributes wealth to higher education insiders.”
An embargoed (until 12:01 AM, March 16, 2011) copy of the study is available for download at: http://centerforcollegeaffordability.org/uploads/How_College_Pricing_Undermines.pdf.
CENTER FOR COLLEGE AFFORDABILITY AND PRODUCTIVITY