An Inclusive Litany

9/15/97

College administrators and the Clinton administration have called for an additional $40 billion to fund student loans for higher education. But there is every sign that subsidized loans have led to increased costs. Student costs at public colleges and universities have risen by 600 percent, well above the rate of inflation, since the Higher Education Act was passed in 1965. For "private" institutions, which rely more heavily on the federal government than their public counterparts, student costs have risen more than 900 percent. Since financial aid is distributed on the basis of "need," the more expensive a school is, the greater the "need" is for students, and the greater schools' incentive to increase prices to attract more federal aid.

Harvard University offers a useful case study. It has a $9 billion endowment—greater than the 1996 budget expenditures of many states—and could provide free education to all its students simply by tapping into the interest from the endowment. But the school has instead increased tuition well above the rate of inflation for the 1997-98 school year. Much of the increased cost for colleges and universities has been due to increases in support staff. Administrators have gone from 15 percent of college employees to 22 percent. The University of Pennsylvania now employs 16,000 full-time employees to educate 18,000 full-time students.