IN THEIR never-ending attempt to buy voter support with government handouts, Congressional Democrats have turned their attention to universities. As students, parents and savvy politicians are aware of, college education is extremely important for future employment, but its cost is quite substantial. Reducing that cost for students is always popular among voters, and to that end politicians over the years have proposed quite a few plans, some effective and some unhelpful. Unfortunately for students, the Democrats' plan falls into the latter category and totally fails to address the real problems at hand.
The core of the proposal is a gradual reduction of the post-graduation interest rate on federally subsidized student loans, currently fixed at 6.8 percent, to 3.4 percent by July of 2011. At first, this might seem like assistance for college-bound students; if students could borrow money at a lower interest rate, the logic goes, then they could afford college more easily.
The actual effects of the Democrats' bill to cut the interest rate for students are not even close to their promises. Student loans do not have to be paid off until after graduation, so students only gain financial assistance from this rate cut after they have already graduated. Basically, then, this bill would take government tax dollars collected from every working American and send that money to young, well-educated college graduates, who according to the Census Bureau make up less than 30 percent of the working-age population. Coming from party so fond of branding Republicans "the party of the rich," this plan to subsidize the loans of college graduates, the most advantaged members of society, seems more than a little inconsistent with past rhetoric.
Even if the Democrats' plan really did increase federal aid for college students, the real problem still would not be addressed. The fundamental factors behind unaffordable college tuition do not involve federal funding. One of the problems is that, over the last decade or so, colleges have been making huge increases in their tuition rates. According to the College Board, last year alone the average tuition rates for private and public four-year universities rose by 5.9 and 6.3 percent, respectively.
The reason that most students still are able to afford college despite the rapid rise in nominal tuition rates is the recent increase in financial aid, which has limited the rise in actual tuition paid. Rather than going to help the low-income families most affected by rising tuition, though, the financial aid increase has only served to help the people who need it the least. Last year's study "Engines of Inequality" by The Education Trust found that from 1995 to 2003, the 50 main state universities raised the amount of aid awarded to families with income above $100,000 by $206.5 million. At the same time, the amount of money given to families with income below $20,000 declined by $25.6 million.
This shocking misallocation of financial aid comes from the trend among colleges to spend their financial resources on merit scholarships. Merit scholarships are used by colleges desiring to increase their academic reputation to attract talented students. These are in contrast to need scholarships, which simply reduce the tuition charged to low-income students, and the two have very different effects. Need-based scholarships, of course, make college more affordable for students from low-income families, and otherwise would find it difficult to pay tuition. Merit-based scholarships, though, tend to go to middle- and upper-class students who could afford college unassisted. This may help these colleges attract good students and move up in the rankings, but it is a waste of money that ought to be going to those who truly need it.
It is no secret that universities tend to be bastions of liberalism, overwhelmingly staffed by Democratic supporters. However, if Democrats truly desire to find a way to make college more affordable, they should take aim at public universities' indefensible practice of awarding merit scholarships to wealthy families. Instead of beguiling the public with misleading promises about the effects of cutting interest rates, pressure state universities to give more financial aid money to the students who actually need it.
Stephen Parsley's column usually appears Wednesdays in The Cavalier Daily. He can be reached at sparsley@cavalierdaily.com.
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