The House approved legislation on Wednesday that would cut the interest rate on Federal student loans almost in half by 2011.  Having funded approximately 90% of my college education through the use of Federal Stafford Loans, I am more than attuned to their value to low and middle income students across the country.  However, this rate cut somewhat concerns me.

College tuition has been rapidly increasing all over the U.S. every single year.  The University of Pittsburgh, for instance, has increased their tuition by 5 to 7 percent on a yearly basis.  There are many reasons for this.  Domestic costs go up of course, with inflation, but universities also tend to be harbingers of waste, blowing money on a lot of unneeded luxury and overly inflated administrative costs.  Why do they do it?  Because they can.

As long as there is a strong demand by students to attend a university there is no incentive for administration to get their costs under control.  If you can raise tuition 5% every year for some new pet project and the students continue to pay and enrollment thrives, why not keep raising it every year?  Want to build a new football stadium with all the latest and greatest amenities?  Raise the tuition.  Want to add a new set of worthless classes and pay a pompous professor to pontificate about the power of the penis?  (No, seriously) Raise the tuition.  I can go on, but you get the idea.

Students will pay the increased costs for the same reasons the universities raise them.  They too, can, which is why I am troubled by this cut in the interest rates making these loans more affordable.  As long as it keeps getting easier and easier for college students to buy their education on credit, the higher tuitions will continue to increase making it more and more expensive.  We’re already at the point where tuition at some schools surpasses the cost of a house.  While those with a degree do generally make more money over their lifetimes than those without, at what point will the cost of obtaining the degree outweigh the financial advantage in the workplace?

Universities will not get their costs under control and make tuition more affordable until they, rather than the students, start feeling it in the purse.  Enrollment has to start dropping before any change whatsoever will even be a thought in a chancellor’s mind.

So, I’m not sure if these rate cuts are good or bad.  In the long run are they going to help the students they are meant for, or hurt them?  I really don’t know, but government solutions tend to make problems worse, not better.  As Ronad Reagan is famous for saying, “The nine most terrifying words in the English language are:  ‘I’m from the government and I’m here to help.’”

I’m interested to hear everyone’s opinion on this.