2 Econ Professors Cite Student Borrowing as Contributor to Rising Tuition

Apr 14, 2016 by

by Jamaal Abdul-Alim –

WASHINGTON — Increased student borrowing, more generous financial aid and the increased value of a college degree have all conspired to drive up tuition, two economics professors argue in a new paper released Tuesday.

“Our model assumes that colleges effectively collude with each other, which would exaggerate some of these effects,” said one of the co-authors, Grey Gordon, an assistant professor of economics at Indiana University Bloomington. “Those who act like monopolists get a lot of tuition out of students if they really want to go to school.”

Gordon made his remarks Tuesday at the American Action Forum, a nonprofit that purports to advance the “center-right policy debate” on various issues.

He was joined by co-author Aaron Hedlund, an assistant professor of economics at the University of Missouri.

Gordon and Hedlund spoke of colleges spending on “quality-enhancing activities” to attract high-achieving students.

“Colleges want a good student body and they want to have a high reputation,” Hedlund said.

In their paper, titled “Accounting for the Rise in College Tuition,” the two maintain that the combined effect of all policy and nonpolicy factors that they studied generate a $6,300 increase in yearly net tuition. Whereas average net tuition stood at $5,700 in 1987, today it is about $11,000, their study states.

The study, which examined tuition increases from the years 1987 through 2010, claims further that:

·        Increased student borrowing enabled by expansions in financial aid explains nearly $3,400 — or more than 50 percent — of the increase in tuition.

·        More generous grant aid contributes $1,300 — or more than 20 percent — to the rise in tuition.

·        Pressure on enrollment from the increased value of a college education is responsible for $1,250 — or nearly 20 percent — of the increase in tuition.

Source: 2 Econ Professors Cite Student Borrowing as Contributor to Rising Tuition – Higher Education

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