February 27, 2008

A case against subsidizing college tuition

Ilya Somin says most of the benefit goes to people who don't need it. An excerpt:

Not only are government subsidies for government tuition unnecessary, they also victimize the truly disadvantaged people in our society: those who lack the educational qualifications to go to college in the first place (usually due to a combination of poor public schooling and a flawed family environment). These people pay some of the taxes that support subsidized tuition for college students who are likely to end up far wealthier than they are. They are also indirectly harmed by the diversion of public funds to tuition subsidies and away from other priorities that might do more to advance the interests of the truly poor. Government tuition subsidies are a classic example of a policy that redistributes wealth to the relatively affluent under the guise of helping the poor.

One argument Somin does not make but could is that the subsidies themselves drive up tuition. If colleges charge whatever the market will bear, then the subsidies simply give people more money to give to the colleges. If the average family could afford $5,000 a year without the subsidy, that's what colleges would charge, and if you give that family an extra $3,000, then the colleges will start charging $8,000 instead, more or less. The higher the subsidy, the higher the tuition.

Posted by dweintraub on February 27, 2008 9:32 AM