How Government Financial Aid to College Students Causes Expensive Education…

Government Financial Aid has resulted in inflating the cost of tuition. College tuition is not driven by the free market, but by government subsidy. Attempts by the government to help poor people have hurt middle class people who do not qualify for financial aid and who are now stuck paying for the higher prices that have resulted from the government subsidy of education.

In any developed society there is a balance… Government can not help one group of people without hurting some other group of people.

People often wonder why college education is so expensive.  Most colleges function very much as private business does. There goal is to bring in as much revenue as possible. When they consider what to charge for tuition, they first consideration how much money government is giving students through financial aid… rather then what is fair or what student can afford on their own. They even consider how much money students will be able to borrow in determining tuition charges.

Colleges base the entire budgets on the anticipated revenues they will be receiving through financial aid programs. They build their facilities and negotiate their teachers contracts based on this. The result is professors that teach only two or three classes a semester at extravagant pays. The classes typically meet only two times a week. The concept of the University was suppose to provide for the efficient education of people interested in higher education. Instead it is now providing education in the most inefficient and expensive manor. If a student were not to receive financial aid and pay for the entire cost of college out of pocket, college would be a very bad investment. This determination is based on the amount of money spent to get a four year degree relative to how much money the student can expect to earn in the next 10 years after that (net of taxes).

The worst of this is cases where students do not qualify for government financial aid. Now those students are burdened with the full cost of a college education that has been inflated by government subsidies to other students.  This is a most unfortunate circumstance for most people because they must decide to either not attend college or obtain loans to finance their education. They may very well spend the next 20 years paying off these loans.

I propose an end to all Government financial aid. The vast majority of students will no longer be able to afford a college education. Colleges will either have to close down… or become more affordable.  Professors will have to accept lower pay or teach more classes. Education will once again start to be a good investment. A good investment is one in which you get more financial benefit out of, then you put into. To achieve this, government financial aid programs must stop.



About Bill Tsafa

Swordman, Gunman, Scholar, Accountant, Patriot
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11 Responses to How Government Financial Aid to College Students Causes Expensive Education…

  1. Andrew Shemo says:

    Good article, Bill.

    I think the market should handle the costs of education whether it be for elementary, high school, or college. If schools where left to compete with each other, they’d have to provide either a similar education or a better education than the nearby school is putting out or potentially have students leave their school to find a better one. By doing this, I believe education would once again thrive in America.

    I’d also like to mention that the amount of grant money that the federal government is providing to students creates a bubble because people just assume that they should go to college and get a degree if they can get the grants. This raises the cost to attend college because a lot of students are trying to get in. Furthermore, most colleges today will look the other way when a student is failing just so they can keep the money flowing in. When I was going to my trade school, one of the teachers was told to not fail anyone so they wouldn’t lose the grant money the government was sending to them.

  2. Tim Wall says:

    I agree with you that any time the government gets involved it distorts the interplay between supply and demand. Which is the academic way of saying when government intervenes prices inevitably go up. This is also true of our healthcare system.

    Unfortunately in a pure market for education many of the talented lower income students simply would not get a shot at an education. They would simply be priced out of the market. The GI Bill in the 1940’s to the 1960’s allowed an awful lot of lower income people to gain access to the middle class. My family was one of them.

    There has to be some medium between a purely market based solution and the current system that allows students to receive government grants and go out and buy a big-screen television with the extra proceeds. (Which is a bit more common than most people are aware.) I am not sure what the exact solution is. But cutting out subsidies for educating lower income families is going to result in many more people being stuck in the rut of low wage jobs due to poor access to education.

  3. Bill Tsafa says:

    Tim, attempts by the government to help poor people have hurt middle class people who do not qualify for financial aid and who are now stuck paying for the higher prices that have resulted from the government subsidy of education.

    In any developed society there is a balance… Government can not help one group of people without hurting some other group of people.

  4. Bill Tsafa says:

    Andrew, you made a very good point about some schools passing students who would otherwise be failing just to keep the grant money flowing in.

  5. sue says:

    The govt.’s tweaking of education costs have resulted in tuition increases, the same thing is happening with food stamp programs and healthcare costs. Keep the government programs rolling, Obamacare, Medicare part D and more food stamps, and the middle class will become the poor. Whenever there is government monies chasing food, education or healthcare, there will be an increase in costs.

  6. Bill Tsafa says:

    Naturally Sue. Anytime businesspeople get the impression that government is giving out money, they raise prices.

  7. Andrew Shemo says:

    @Tim, I don’t think it’s true to state that in a pure market situation, the poor wouldn’t be able to get an education. Remember, the market has lifted the standards of living for every human being around the globe. Most people who were once poor, can now afford clothing, shoes, food, maybe an mp3 player, and maybe a computer. In America, almost everyone has at least 1 computer, a smart phone, an ipod, and expensive clothing.

    The market – at least in my opinion – can and will lift everyone out of poverty that’s willing to work hard for living. The “war on poverty” waged by the state and federal government is high ineffective and highly immoral as it breeds corruption and dependency.

    First, I think parents should have to pay for their kids to go to school directly, rather than through taxes whether they go to public, private, or catholic school.

    Second, if the market was able to price education, the more wealthy areas would reflect higher prices whereas the poorer areas would reflect lower costs. When money is on a line, you’ll either produce results or get fired. With government education, the money keeps flowing in whether you’re a good school or a shitty school; there’s no incentive for teachers to actually do well in educating their students. Now, that’s not to say that teachers are lazy (though, some are).

  8. Bill Tsafa says:

    Andrew, you would see a lot more small private schools up open up if the market for higher education was allow to function properly. Right now such small private school would have a difficult time competing with big colleges that are government funded with financial aid.

    The large inefficient Universities would close down if the financial aid was cut off and they had to compete in a more free market. You would see a lot more small local colleges open up that accommodate no more then 1,000 students at a time. These institutions would function at much less cost with a much smaller staff.

    I have a BS in Accounting and I can tell you that it could be taught in single classroom college just as well as it can be taught at Yale. Unless you are trying to get a degree in some highly technical field where you need to do exercises on nuclear reactors in order to learn, you don’t need a very advanced facility.

    I can honestly say that after getting my college degree in Accounting, I have done enough study in the field of history to get a Masters Degree in History. Most of that study was by downloading entire college lectures onto my computer and doing the work that would have been required if I was taking the actual class. As a result, I consider myself a much better historian then an accountant, even though I have an accounting degree but not a history degree.

    My deep understanding of history is what has allowed me to write the articles I write. I understand how money and banking works today, because I understand how it was developed in Florence during the Middle-ages and how it has evolved over time.

  9. Andrew Shemo says:

    I agree with you about the private schools.

    See, I don’t even think people need to go to college to become further educated in a subject or in a particular trade or field. Maybe to become a doctor, but not an accountant, a financial analyst, an information technology professional, and etc. All colleges do is give you books to read and a few hours of classroom lecture per week. The rest of the burden is up to you to a) study your books, b) do your homework, and c) show up to class. I think most people can save a boat load of money by staying home and studying their books. Sadly, most businesses won’t hire you without some piece of paper that says you went to college.

  10. Bill Tsafa says:

    I can affirm for you that coming out of college, I had only a theoretical understand of accounting, but not the type of understanding that is necessary to actually do the job. The real knowledge and skill necessary to do the job came with experience.

  11. Andrew Shemo says:

    exactly. I work in the IT industry and can tell you that there’s nothing that compares to knowledge as experience. You can read all the books you want and pass all the tests you want, but until you’re diagnosing problems on the fly, you’re just another individual.

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