Ed Secretary: Federal Subsidies for College Tuition Do Not Increase Cost of Tuition

By Fred Lucas | April 20, 2012 | 4:19pm EDT

Education Secretary Arne Duncan speaks durng the daily news briefing at the White House, Friday, April 20, 2012, in Washington. (AP Photo/Carolyn Kaster)

(CNSNews.com) – Education Secretary Arne Duncan told CNSNews.com Friday that when the federal government subsidizes the cost of tuition by loaning tax dollars to college students at low interest rates it does not cause an increase in the cost of college.

Duncan also characterized student loans as “very good debt to have.”

Duncan briefed reporters at the White House ahead of President Barack Obama’s trips to the campuses of the University of North Carolina, the University of Iowa and the University of Colorado, all in swing states. Obama will talk about the importance of keeping the interest rates on student loans down.

Duncan touted that the Obama administration has increased access to student loans and grants.

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CNSNews.com asked him, “How would you go about balancing the reality of the cost of college with the concerns that allowing more access to more credit would create perhaps a student loan bubble down the road and actually increase college tuition?”

Duncan said the administration’s goal is to see more students graduate college.

“When you have no debt, that is maybe the best situation, but this is not bad debt to have. As a matter of fact it’s very good debt to have,” Duncan told CNSNews.com. “We have all kinds of data, not just around jobs, but about how much you’re earning potential throughout your lifetime goes up from a high school graduate to a two-year degree to a four-year degree. So this is the best long-term investment we can make.”

He added that the rising cost and debt is a concern. “But we are worried about debt going higher and higher. And so when we have an opportunity to work together in a bipartisan way to prevent that escalation of debt, this is the right thing to do, I expect folks to step up and do that.”

CNSNews.com followed up, “Do you think there is a correlation between more access to student loans and the rising cost of tuition?”

Duncan responded, “I don’t.”

“We looked at it really closely, actually more on the Pell grant side, and the data is very interesting,” Duncan said. “People say when you increase the Pell grants, tuition goes up. You look over 30 years, all those 30 years, 19 of those years, Pell grants went up, 10 of those years, Pell grants went down. One year it was stable, and all 30 of those years tuition went up. I don’t think there is a correlation there.”

He stressed that not all the burden for the rising cost of college is on the shoulders of parents and students.

“This is about shared responsibility. We are challenging states to continue to invest,” Duncan said, adding, “We can’t do this by ourselves, and universities have to keep down their tuition and also build cultures around completion. We are trying to do a lot to provide greater transparency and score cards so parents can make choices about which universities are going to provide a great education but also be at a reasonable cost.”

Citing recent studies, Richard Vedder, director of the Center for College Affordability and Productivity, a higher education think tank, said there is clearly a correlation between subsidies and increased costs.

“He’s flat out wrong,” Vedder told CNSNews.com.

Vedder cited studies by the National Bureau of Economic Research (NBER), co-authored by Stephanie Riegg Cellini of George Washington University and Claudia Golden of Harvard, that sampled for-profit schools eligible for federal aid with those that are not.

Schools eligible for federal aid charged 75 percent higher tuition than schools that were not. He also cited a study by his own center that found a direct relationship between student loans and the cost of college.

“In my judgment there is no doubt that the big run-up in student loans helped increase tuition,” he said. “The student loan program has been self-defeating in decreasing the burden on students, because it just goes to the colleges themselves, and the academic arms races just gets higher and higher.”

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