The Corner

Education

What Is the ‘Bennett Hypothesis’ and Why Does it Matter?

Serving as Reagan’s Secretary of Education in 1987, Bill Bennett advanced the argument that government student aid had a lot to do with the constant increase in the cost of higher education. Since the government was putting many dollars in the pockets of high-school grads which they could use only if they enrolled in an accredited college, it stood to reason that the people who ran the colleges would see the opportunity to capture many of those dollars for their own spending desires by increasing tuition and fees. While some leftists dismissed the idea (“College presidents aren’t like greedy businessmen!”) those who have carefully analyzed the connection between student aid and rising costs have largely come to the conclusion that Bennett had it right.

The Martin Center has just released a new paper by Jenna Robinson on the Bennett Hypothesis and she writes about it in today’s Clarion Call.

Robinson writes, “The price of college tuition and fees has risen 1,335 percent since 1978: much faster than inflation and faster even than medical care (704 percent) and housing (511 percent). Too many students go to college for the wrong reasons and too few graduate. Almost 4 million students dropped out of college with debt in 2015 and 2016. Student borrowing has soared to more than $1 trillion with many graduates (and non-graduates) unable to pay back their student loans. In short, student borrowing is on an unsustainable path. Understanding the Bennett Hypothesis and examining the evidence is the first step in getting back on course.”

In the paper, Robinson surveyed many papers on the Bennett Hypothesis and they generally conclude that for every dollar of additional student aid, tuition goes up by 60 cents. The effect is most pronounced at for-profit institutions that are extremely tuition-dependent. 

With the truth of the Bennett Hypothesis well established, we ought to stop listening to the politicians and higher-education wonks who keep saying that we must increase student aid to make higher education “affordable.” It’s time to get the dog to stop chasing its tail. The federal government should never have gotten into the business of subsidizing college (Thanks, LBJ!) and if we can’t stop cold turkey (which, sadly, is not politically possible), we need to start to consider the best ways to ratchet student aid down.

Robinson concludes, “Acting now to combat tuition inflation will improve the lives of thousands of individuals—students, parents, and taxpayers. It will also benefit the national economy. Student borrowers who previously ‘boomeranged’ home to mom and dad and put off major life events such as marriage, homeownership, and children, will be able to fully participate in the economy. Young people will not be forced by crushing debt to consider only financial rewards when choosing a career.”

George Leef is the director of research for the John William Pope Center for Higher Education Policy.

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