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<p>The authors of the paper would agree with you, up to a point. But the tuition increase is pretty modest–a $440 increase in tuition for each $2,000 increase in Pell grants, per the authors’ model. And since there have been precious few $2,000 increases in Pell grants (possibly none in real dollars as opposed to nominal dollars, given general rates of inflation in the higher education sector), and there have been frequent and numerous increases in tuition far in excess $440 per year, you can be darned certain that increases in Pell grants are not a major driver of tuition increases. If you’re taking it in the shorts on tuition, look for another causes, because it sure ain’t Pell grants that are doing the bulk of the damage.</p>
<p>Yet despite driving tuition slightly higher, the model predicts the net cost of a private college will come down (on average) with a Pell grant increase. How could that be? Well, because increased Pell grant revenue plus increased tuition revenue made possible by the Pell grant increase will allow some private colleges to deny admission to some high-income but lower-ability students who they were admitting only for the tuition. This makes it possible for private colleges to admit more high-ability middle-income students, in place of rich dunderheads. So yes, if you’re the full-pay parent of a lower-ability student who, absent the Pell grant increase, would have gotten into a better college because that college needed the money, then yes, the model says you’ll be hurt. And even if you’re the full-pay parent of a high-ability student and you elect to send your child to a private college that doesn’t give merit aid, yes, you’ll pay slightly higher tuition–though ultimately (the model would say) it’s your choice not to go for the merit money. But the vast majority of your tuition increases are not attributable to Pell grant increases. So I don’t think it’s worth getting exercised about.</p>