Monthly Archives: September 2015

Are free college proposals progressive or regressive?

Regressive according to Don Francis:

we’re seeing one so-called progressive candidate after another call for the federal government to enact major new spending programs to hold down tuition at public universities. Here’s the thing — the results would be regressive…

subsidies meant to make the public university more affordable will actually make it more difficult for lower-income and underrepresented students to gain admission, as they must compete with higher-income students (many of whom now attend private universities) seeking the generous government subsidy…

I believe that using institutional funding instead of vouchers to students (Pell Grants and state need-based aid programs) guarantees that taxpayer money will be wasted on those without need, while many with need will be left behind even further than they are today. Would a progressive even consider eliminating means-tested food stamps and replacing them with publicly subsidized grocery stores for all who want the government subsidy? Even worse, would they do this knowing that these grocery stores don’t have to allow all people to come in? In fact, that many of these grocery stores generally serve a population whose family income exceeds the national average?…

Providing federal dollars to states to help subsidize low tuition at the public universities is a great idea if your ultimate goal is to pander to the public’s desire to have someone else pay for what is one of the most costly investments you can make in yourself or the members of your family.

However, it is also one of the most regressive economic stances you can take when put into practice, and we should stop pretending there is anything progressive about these proposals…

Q: Does the tax deduction for tuition affect college enrollment?

A. No.

Caroline M. Hoxby and George B. Bulman

The federal tax deduction for tuition potentially increases investments in postsecondary education at minimal administrative cost. We assess whether it actually does this using regression discontinuity methods on the income cutoffs that govern eligibility for the deduction. Although many eligible households take nearly the maximum deduction allowed, we find no evidence that it affects attending college (at all), attending full- versus part-time, attending four- versus two-year college, the resources experienced in college, the amount paid for college, or student loans… (emphasis added)

Dani Rodrik on models in economics

Dani Rodrik:

Economics is not the kind of science in which there could ever be one true model that works best in all contexts. The point is not “to reach a consensus about which model is right,” as Romer puts it, but to figure out which model applies best in a given setting. And doing that will always remain a craft, not a science, especially when the choice has to be made in real time.

The social world differs from the physical world because it is man-made and hence almost infinitely malleable. So, unlike the natural sciences, economics advances scientifically not by replacing old models with better ones, but by expanding its library of models, with each shedding light on a different social contingency…

the profession’s internal critics are wrong to claim that the discipline has gone wrong because economists have yet to reach consensus on the “correct” models (their preferred ones of course)…

The only problem with letting Perkins loans expire is that it robs us of the redemptive value of actively killing such a terrible program

Michael Stratford reports that the Perkins Loan program will expire in a couple of weeks.

The Federal Perkins Loan Program, which allows colleges to make loans of typically several thousand dollars to certain students, will expire on Sept. 30 unless Congress acts to reauthorize it…

Not only would Congress have to pass legislation to continue the program, but lawmakers would also have to find more than $500 million elsewhere in the budget to offset what the Congressional Budget Office has determined is a cost of renewing the program…

If Congress doesn’t act before the automatic extension ends onSept. 30, colleges would no longer be able to make new Perkins Loans to students, except for limited circumstances in which a student is already receiving a Perkins Loan and needs another one to graduate.

The end of this program is long overdo. But it would have been better for our consciences if we could have brought ourselves to actively kill it. Perkins loans were a bait and switch. They were sold as another loan to help needy students, yet dollars were not distributed by need. Rather, the richest colleges received a disproportionate share of the funds. As I wrote  for the Quick and the Ed blog (which has sadly been shoved down the memory hole):

there is very little relationship between the number of needy students at a college and the number of Perkins loans awarded.

Indeed, if Perkins loans were distributed based on need, each college would have about 20 times as many Pell grant recipients as Perkins loan recipients. Yet incredibly, some colleges manage to give more students Perkins loans than there are Pell grant students at the college. For example:

  • Washington University in St Louis awarded 2,217 Perkins loans, yet only had 542 Pell students.
  • Duke awarded 1,731 Perkins loans, yet only had 961 Pell students.
  • Harvard awarded 2,149 Perkins loans, yet only had 1,307 Pell students.

This is astounding. Perkins is supposedly a program for needy students. Yet many non-Pell students at Washington University, Duke, Harvard, and many other colleges are receiving Perkins loans, while more than 9 million Pell grant students at other colleges—who are even more needy—do not receive a Perkins loan.

This incredible state of affairs is possible because Perkins loans are one of the campus-based award programs where funding is based largely on past allocations rather than the actual need of students, meaning that older colleges and those that aggressively lobby receive more funding.

There is something very wrong when the amount of money awarded by a college from a program for needy students is based more on its political power than the need of its students. It is time to recognize that the Perkins loan program is not an aid program for needy students; rather, it is a slush fund for America’s aristocratic colleges.

Jason Delisle on income-based repayment

Jason Delisle via Mikhail Zinshteyn:

Jason Delisle, an education analyst at the New America think-tank calculated that income-based repayment programs are costing taxpayers $11 billion a year…

“We have a federal program that will provide a $150,000 of loan forgiveness to someone who graduates from Georgetown Law, but a poor kid who wants to go to Georgetown undergrad can only get $5,000 a year,” Delisle said. “I would struggle to find a more regressive federal education policy,” he added.