In his recent State of the Union Address, President Obama decried what he called "skyrocketing" tuition at American Universities and called on Congress to withdraw federal support from Colleges if such increases continue. As the President put it:
"[L]et me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down."
The Administration subsequently explained that it will ask Congress to cut the availability of student loans in those states where public universities raise tuition more than the Administration would like. This is upside down. To be sure, tuition has risen significantly over the past few years. However, colleges that have raised tuition have had little choice. Across the nation, states responded to the recent recession by reducing financial support for higher education. (This article describes this phenomenon in North Carolina.). Colleges and Universities in such states have responded by raising tuition in an effort to maintain the quality of the product they offer, and tuition at such universities is still significantly below the cost of the education provided. Moreover, many such universities have set aside significant portions of the proceeds from such increaes to support need-based financial aid that ensures the very sort of access President Obama claims to support. California, for instance, recently set aside 1/3 of the proceeds from a tuition increase to expand the pool of resources available for need-based financial aid.
In sum, state budget cuts have caused colleges and universities to raise tuition to protect the quality of the product they offer and generate sufficient funds for financial aid. Instead of deterring future tuition increases, cuts to the Federal Loan Program will punish the very students harmed by increased tuition and likely cause schools to raise tuition even more to generate the financial aid necessary to ensure sufficient access.