More Evidence Supporting My Story

by Andrew Gillen

In my financial aid report I argued, among other things, that some financial aid practices have the side effect of encouraging higher tuition. The two most popular, paraphrased responses were:

1) Duh, that is blatantly obvious. You really needed a PhD and a 40 page paper to realize that? What are they teaching kids these days?

2) You idiot - how could you be so craven as to think that this is even in the realm of possibility. Your cherry picked evidence can't hide the fact that your methodology is flawed, your assumptions indefensible, and your agenda makes you hopelessly biased.

I foolishly tried to respond to the second group (see here here here) when what I should have done was collect more cherries, I mean evidence.

Stephanie Lee provides one such cherry in Inside Higher Ed. The basic story is that the Stimulus bill introduced the American Opportunity Credit, which among other things, provides a tax credit for the first $2,000 of tuition and fees paid. Any school charging less than $2,000, such as California Community Colleges (CCC), could basically raise tuition without leaving their students any worse off, since the higher tuition would be reimbursed by the tax credit. The LAO is proposing exactly that.

Myself and group 1 think that this proposal is likely to be acted on, and that we'll see tuition rise more than it otherwise would have. Group 2 does not. Since California is having a pretty severe budget crisis right now, we'll soon see what happens.

While a better use of the money would be to fund Pell grants, I don't think this is a bad outcome in the instance of CCC. While there are serious issues [sticker shock (a big consideration, especially among California's large Hispanic population), timing (they have to pay tuition and then get the money back a year later), refundability (the credit is only 40% refundable, so it's not clear to me that a student attend CCC full time would have sufficient tax liability to benefit), etc.], community colleges generally receive quite spartan funding, and are likely to see cuts, so this could help keep them functioning at a relatively low cost to students, at least compared to the alternatives. I would feel quite differently about this happening at lavishly funded schools, which it arguably will, which is why I think using the money for Pell grants would have been a better policy option.