I would like to know if any prescient economist back when the big “Great Society” push for more college access was starting predicted that it would both make higher education much more expensive and lead to a widening income gap in society. (If anyone has such information, please share it!) Those are two of its unintended effects. In today’s Pope Center Clarion Call, I discuss them.
First, the impact on cost: Back in 1987 Secretary of Education Bill Bennett argued that the more generous federal student aid, the more colleges raised their tuitions. That’s been debated for years. The argument that federal aid had no impact on the cost of attending was never persuasive, and it’s much less so following a recent study by several economists at the New York Fed. I discuss their work and how it supports other pro-Bennett arguments.
But I also take issue with a notion they advance (but is not a finding; it’s like dicta in a legal opinion) — that nevertheless, the increased access to higher ed might lead to a decreasing income gap. Another recent paper by Daniel Bennett and Rich Vedder shows that, if anything, more college is now causing the income gap to increase. The culprit is credential inflation that is eliminating more and more decent career paths for those people who can’t manage to get a degree.
Now, I am not among those who frets about statistical gaps, but I don’t like policies that arbitrarily make some better off but others worse off. Our mania over college completion is such a policy. Egalitarians ought to read the Bennett/Vedder paper and think seriously about the impact of federal aid.