Monday, June 14, 2010

Blaming Former Presidents

by Daniel L. Bennett

The Obama Administration likes to blame former President Bush for the growing national deficit, although the new administration has certainly not shown any restraint in combating this problem. Well, I've got some blame to place on former presidents myself - rapid tuition inflation over the past several decades can and should be attributed to former presidents, beginning with Jimmy Carter. In 1978, the Carter Administration passed the Middle Income Student Assistance Act (MISSA), which extended federal guaranteed loans to all students, regardless of financial need or income. Before this, federal loans were restricted based on income and need.

The above chart shows federal aid expenditures by program type, in constant 2008 dollars, between 1970-71 and 2008-09. As we can see, loans dollars began escalating rapidly a few years after MISSA was passed by President Carter. The sharp spike that we see again in 1992-93 marks the expansion of the Parent Loan (Plus) program and introduction of a new, unsubsidized loan option not restricted by financial need under the last year of the G.H. Bush Administration, and subsequent expansion of the Direct Loan program by newly elected President Clinton in 1993.

What these policy changes did, was increase the ability to pay for students from middle and high income families. My colleague Andrew Gillen, Robert Martin and others have explained this phenomenon quite well, so I won't go into much detail here.

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