Cato on education

Cato:

The Department of Education spends about $30 billion a year on subsidies for higher education. The bulk of that funding goes toward student aid programs, with the balance going toward grants to educational institutions. In 2008, grants to institutions cost $2.3 billion and aid programs cost $27.6 billion, which included $17.4 billion for student grants, $9.6 billion for student loans, and $0.6 billion for administration.

[...]Of the total $30 billion in 2008, $2.3 billion went toward higher educational institutions, including large shares to Gallaudet College and Howard University. The remaining $27.6 billion went toward student aid: $5.5 billion for direct student loans made by the government, $4.9 billion for federally guaranteed loans made by private lenders, $15.7 billion for grants, and the rest for federal administration. Note that the figures for loans are the net amount of federal support, based on assumptions about loan repayments. The gross amount of loans is much larger—in fiscal 2008, the gross amount of loans was $110 billion.

[...]Also, the federal government funds more than $30 billion of research at the nation’s universities through various departments.

[...]Finally, a growing part of federal support for education comes through the tax code. In 1995, there were just 7 special breaks in the income tax code for K-12 and higher education. Today, there are 16 breaks, including the lifetime learning tax credit, Hope scholarship, education savings accounts, and education facility bonds. Politicians of both parties continue to offer more breaks, so the tax code will likely get more crowded with such giveaways.

[...]One can look at average cost data to see the inflationary effect of rising student aid. From 1987 to 2007, there was a strong upward trend in average per-student costs of private and public universities (tuition, fees, and room and board). However, if you subtract from those costs federal grants, loans, and tax benefits, there has been only a modest increase over two decades.

Consider four-year private colleges and universities. The average real cost (in 2006 dollars) per student rose from $18,122 in 1986 to $30,497 in 2006, a 68 percent increase. But students didn’t bear that large increase because of grants, loans, and tax benefits. After these benefits, the cost grew from $10,943 to $14,158, a much more modest 29 percent increase. A similar pattern holds for price increases and public institutions.

[...]# The six-year graduation rate for bachelor’s students is only about 56 percent, indicating that many students are not very serious about education;16

# Almost half of full-time college students binge drink or abuse drugs, and the incidence of such behaviors is rising.17

# Between 1983 and 2007, energy consumption costs at America’s colleges rose twice as fast as energy costs in the private business sector, indicating that colleges are not very cost-conscious.18

[...]One problem with needs-based student aid, for example, is that it creates incentives for families to misreport their income to garner excess federal cash. With the Pell grant program, this fraud problem costs taxpayers hundreds of millions of dollars per year.21 Another ongoing problem is the high default rate on student loan programs. In 2001, the Government Accountability Office found that there were about $22 billion of student loans in default.22

[...]Under most student loan and grant programs, the aid is sent directly to thousands of educational institutions, which are supposed to distribute it to the eligible students. However, that distribution system has attracted swarms of shady school operators, who have lined their own pockets with funds meant for students.

[...]The report found that losses from the student loan program totaled an enormous $13 billion between 1983 and 1990.

[...]In 1994, the department admitted that it was losing a staggering $3 billion or more annually to waste, fraud, and loan defaults, accounting for more than 10 percent of its entire budget.

[...]Students and schools had to fill out paperwork to get the aid, but the Department of Education never verified it.

[...]One 2002 investigation revealed how easy it is to scam student loan programs: the GAO created a fake university in London with three fake students, and then applied for, and was awarded, $55,000 in federal student loans.28 And a 2005 investigation revealed that owners of a company called the CSC Institute stole $4.3 million of the $13 million it received in Pell grants.29