Larry Singel and Joe Stone have written a very interesting article entitled For Whom the Pell Tolls: The Response of University Tuition to Federal Grants in Aid. They note that several Secretaries of Education, beginning with Bill Bennett, have suggested that increasing federal student financial aid to higher education has, in effect, authorized higher education to increase tuition faster than the CPI. This has come to be called the Bennett Hypothesis. To test this hypothesis, they look at correlations between tuition increases and increases in Pell grants. Their findings are troubling:
Based on a panel of 1554 colleges and universities from 1988 to1996, we find little evidence of the Bennett hypothesis for in-state tuition for public universities. For private universities, though, increases in Pell grants appear to be matched nearly one for one by increases in tuition. Results for out-of-state tuition for public universities are similar to those for private universities, suggesting that they behave more like private universities in setting out-of-state tuition.
This paper is well worth reading in its entirety. Although others will try to tease apart cause and effect in other ways, this certainly seems to support the Bennett hypothesis in so far as private institutions (and public institutions for out of state students) are concerned. As such, this paper obviously will play a major role in discussions in Washington regarding price in higher education.
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Interesting, what is your take on this Pr. Armstrong?
Posted by: Adam | April 15, 2007 at 05:48 AM