Obama warns colleges: Rein in tuition or risk aid

[StitchInTime]

<p>A another lesson from the law of unintended consequences that is applicable to many social policies that are well-intentioned but blind to [behavioral</a> economics](<a href=“http://en.wikipedia.org/wiki/Behavioral_economics]behavioral”>Behavioral economics - Wikipedia):</p>

<p>From [Why</a> College Aid Makes College More Expensive](<a href=“Spending & Saving - MarketWatch”>http://www.smartmoney.com/spend/family-money/why-college-aid-makes-college-more-expensive-1330033152060/):</p>

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Federal aid for students has increased 164% over the past decade, adjusted for inflation, according to the College Board. Yet three-quarters of Americans and even a majority of college presidents see college as unaffordable for most, and that sentiment has been steadily spreading, the Pew Research Center reports.</p>

<p>Two new studies offer clues on why. One measures the degree to which some colleges reduce their own aid in response to increased federal aid. The other suggests federal aid is helping to push college costs higher.</p>

<p>Lesley Turner, a PhD candidate at Columbia University, looked at data on aid from 1996 to 2008 and calculated that, on average, schools increased Pell Grant recipients’ prices by $17 in response to every $100 of Pell Grant aid. More selective nonprofit schools’ response was largest and these schools raised prices by $66 for every $100 of Pell Grant aid…

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