Too Fast, Too Spurious

Understandably concerned that rising tuition may prevent millions of young Americans from attending college in the next few years, Howard McKeon, a Republican representative from California, thinks he has an easy solution: he’s introduced a bill that would penalize schools that raise tuition too fast.

If the bill were signed into law, any college or university that increased its tuition at more than twice the rate of inflation for three consecutive years could lose its eligibility for millions of dollars in federal funding, including Perkins loans and federal work study, which help lower-income students pay for school. According to the American Council on Education, 24 percent of the nation’s higher education institutions would be constrained by this bill.

While many Americans are frustrated by the high costs of college, legislation limiting tuition increases is not the way to combat it; McKeon’s proposal would likely hamper the quality of American higher education. By targeting only tuition increases, McKeon is missing half of the story—fast tuitions increases at select private and state schools over the last 50 years has been coupled with tuition decreases at the less expensive community colleges. This cost dispersion has made colleges more heterogeneous—widening the spectrum of schools from which students can choose the most appropriate one for them.

The market for higher education not only provides a variety of cost options for students, it also induces competition among the thousands of American colleges and universities.

Colleges do not increase tuition in an effort to swindle students; just the opposite, schools would likely lose applicant interest if they raised their rates without improving the product they provide. A school that rapidly increases the price to attend presumably uses the revenue to hire more, and better, professors and improve services, which attract higher achieving students and enhance the college’s competitive edge. In fact, at the schools where tuition is rising the fastest, per student spending often far exceeds tuition—and the number of applications to these schools continues to rise every year. Many students are willing to pay more for additional services and educational opportunities that only well-funded schools can provide.

Capping tuition would force schools to scale back such quality-enhancing measures. According to a recent article in The Economist, “government micromanagement” has left the publicly funded British universities so strapped for cash that many have been forced to curtail their course offerings and even shut down entire departments.

Increasing access to post-secondary education for students from low- and middle- incomes families should be a high priority for the federal government. But instead of hampering schools’ ability to raise revenue, Congress should target assistance directly to Americans who need financial support to pay for college. Nuanced policies such as tax credits for tuition-paying families and incentives for colleges to provide generous financial aid will ultimately be more effective at making college affordable for low and middle-income Americans. McKeon may believe that his plan would help students, but it would merely force schools to choose whether to forgo federal aid or tuition revenue. Either way, colleges would have to cut back—in services, academic programs or financial aid—and students would lose out.