William J. Bennett was probably too simplistic when he famously proclaimed 25 years ago that increased student aid makes it easier for colleges to raise their tuition, says a new policy paper from the Center for College Affordability and Productivity, but he wasn’t necessarily wrong.
The assertion by the former secretary of education, which has come to be known as the Bennett hypothesis, has been widely debated over the years, with some academics arguing that it was unfounded and others that it was dead-on.
Now, in the paper, “Introducing Bennett Hypothesis 2.0,” Andrew Gillen, research director at the center, says the mixed findings can be explained by factors that Mr. Bennett overlooked.
For one, says Mr. Gillen in the paper, Mr. Bennett did not differentiate between aid going to low-income students and aid for less-needy students. Mr. Gillen says that increased aid aimed at the neediest students does help make college more affordable to them. So in those cases, he says, the increased aid doesn’t necessarily fuel higher tuition. But aid that is universally available will make it easier for middle-class students to afford a higher tuition, which is “more likely to simply fuel tuition increases” without making college more affordable.
Arthur M. Hauptman, a student-aid expert who has long argued that aid should be directed to the neediest students, and who closely followed the debates over the original “Bennett hypothesis,” says that conclusion, from an organization he calls “conservative,” is a “helpful” addition to the discourse about student aid. (It would have been even more helpful, he says, if the paper had also examined the “substitution effect"—how much colleges cut back on their own student aid when government aid goes up. “Just looking at the price effect is missing the story,” says Mr. Hauptman, who examined the paper for The Chronicle.)
Mr. Gillen also writes that the Bennett hypothesis didn’t take into account the effects of tuition caps—whether formally adopted by state law or informally imposed by trustees for competitive reasons. In those cases, the increased availability of aid might not have resulted in higher tuition, but it might have had other effects, such as allowing colleges to become more selective.
Ultimately, however, the main reason the Bennett hypothesis does still hold true, writes Mr. Gillen, is “the nature of competition in higher education.” While bread producers, for example, compete on value that takes into account quality relative to price, most colleges compete on the basis of reputation, prestige, and “excellence,” which are harder to measure. And often, he says, the proxies for quality are high-quality inputs, like new laboratories and top professors, and they’re expensive. (And those added costs are not one-time-only expenses but are continuous.)
Absent other measures of quality, says Mr. Gillen, colleges “will spend what they can, meaning that revenues drive costs.”
The availability of increased aid doesn’t create the drive for rising prices—it only exacerbates it, concludes Mr. Gillen. “Nevertheless, that is no excuse for ill-designed financial-aid programs to pour fuel on the fire.”
