Student Financial Aid Programs Work! But do they work for students or for colleges?

George Leef:

Suppose that parents want their college-graduate son or daughter who has found a good job to be able to afford a house that would otherwise be too costly. So they give him or her $25,000 to be used toward the down payment. There is no doubt that they have made home ownership more affordable.

That is the idea behind federal financial aid programs for students, which give (or lend at attractive terms) money that offsets some of the cost of going to college. Obviously those programs work. If students have more money, their college education won't cost them (and their families) as much.

But like many government programs, financial aid for college has unintended consequences that may partially or completely negate their intended consequences. In a recent paper, "How College Pricing Undermines Financial Aid" economists Robert Martin and Andrew Gillen make a strong case that instead of working to help students afford college, the government's financial aid programs actually work for the schools.

Posted by Jim Zellmer at April 8, 2011 1:44 AM
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