PLUS Loans Take the Lid Off Tuition Prices

PLUS Loans Take the Lid Off Tuition Prices by Preston Cooper, Foundation For Economic Education

The Negatives of PLUS Loans

A consensus is growing that federal student aid, however well-intentioned, is directly responsible for increases in college tuition over the past few decades. One study estimates that expansions of federal student aid roughly doubled tuition costs relative to a baseline, while another finds that each dollar of subsidized Stafford student loans boost tuition by 65 cents. The logic is simple: when students have access to a generous line of credit, colleges will raise their prices because their students can easily borrow the money to pay them.

In theory, since there is a cap on how much students may...