When President Bush submits his FY2006 budget plan to Congress today it will contain, for the first time in his administration, some proposed increases in student aid as well as plans to cut back on an arguably duplicative student loan program called the Perkins loan.

Though the details are still sketchy, current and future college parents should tentatively applaud these presidential proposals and, in the spirit that must be attached to ideas from any administration, we should also ask for more support for higher education. The facts are on our side, and so too is the political dynamic.

The facts are that the sticker price of college has risen dramatically during these first years of the 21st century. There are reasons aplenty for this, but the two fundamental factors are:

  1. supply and demand (straight from Econ 101); and
  2. loss of subsidies from, in the case of public schools, state appropriations and from, in the case of private schools, endowments.

The supply and demand figures are clear. In 2001, there were 8 million full-time college students and today there are 8.8 million, a 10 percent increase in “demand” while the “supply,” as measured by the number of seats available at traditional 4-year colleges, has remained relatively fixed. This imbalance causes upward price pressure and, to date, parents have shown a willingness to pay higher and higher sticker prices in order to help their children achieve the dream of a college education.

At the same time, state- and/or endowment-funded subsidies for higher education have shrunk or at least slowed their growth in recent years. For some of these cuts, the blame can fairly be placed on sagging state economies and the poor performance of the markets. Not all of the blame can be placed on slow economic growth, however, as many states have chosen to slash higher ed support in bad times and in good.

It is here that the twin factors of supply and demand and loss of subsidies intertwine. When people are voting with their feet, and sending their kids to college regardless of cost, then there is no incentive for any school, public or private, to hold down costs. And when ways to meet those costs, namely public funding or endowment-related subsidies start to wane, then the only answer to keep budgets in balance is higher tuition.

To summarize the problem: when more and more families are willing to pay ever-higher prices for a college education, then there is no incentive for the providers of that education to hold down costs.

So what is the solution? One solution would be for large numbers of college-ready students to stay away from higher education. However, that is very unlikely to happen and it would carry extremely negative consequences, not only for those missed-opportunity students, but also for our economy and society as a whole, which are highly dependent on an educated workforce and citizenry.

The reasonable solution, therefore, is for the federal government to provide various ways to assist families in meeting the cost of higher education. That’s what these new Bush Administration proposals are all about, and why I am supportive of them in concept, though desiring to see the fine print before going too far in my praise.

When the President’s budget is released later today, I will take a closer look at the proposals and let you know more about them during the next week. I’ll also address the political dynamic that is in our favor. Stay tuned.

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