Back in 1987, Bill Bennett advanced the argument that a key reason why colleges keep increasing their tuition is that the government keeps making financial aid more generous. His insight became known as the Bennett Hypothesis and has generated a great deal of controversy. Naturally, leftists hated it because it gave people reason to doubt another of their “compassionate” programs.
One scholar who did an excellent job of analyzing the Bennett Hypothesis several years ago is Andrew Gillen. While working for Rich Vedder’s Center for College Affordability and Productivity, he wrote a paper entitled “The Bennett Hypothesis 2.0” (the link to that paper is not working at present, but David Wilezol discussed it in this Minding the Campus essay).
In this Martin Center article, Gillen returns to the effects of federal aid with an argument that the Bennett Hypothesis would be largely defeated if the government made a change in the way it calculates student aid: replace the cost of attendance (CoA) with the median cost of college. He explains, “The CoA fuels the Bennett Hypothesis because it provides a direct link between increasing tuition and an increase in aid. Under the Median Cost of College method, this link is severed because aid eligibility is determined independently of an individual college’s tuition (unless it happens to be the college with the median cost).”
Moreover, Gillen argues, changing away from CoA will stop the perverse practice of providing more aid for students who attend elite, high-cost colleges — students who can usually better afford payment of the expense themselves.
He concludes, “Although the Ivy League and other expensive schools may scream, it will go a long way toward setting federal financial aid back on a sensible course.”
In my view, the most sensible course by far is to get the federal government out of subsidizing education, but since there is no prospect of that in the foreseeable future, Gillen’s plan deserves serious consideration.