Thursday, May 31, 2007

Another Shot At The Wrong Target

Rep. Tanya Pullin wants to expand need-based financial aid for college students --something there really isn't a shortage of -- and top it off with a freeze on tuition increases at state schools.

The program is called the "Kentucky Postsecondary Education Covenant Award."

Today's trick question: name one example of government price-fixing that has worked without creating unintended consequences worse than the underlying problem.

The part of the bill that subtracts any other aid or scholarships from the "Covenant Award" also accomplishes exactly the wrong thing. We should encourage students who take the initiative to pile up scholarship awards in excess of "costs of education." This program punishes those who would do so by reducing the need-based award, requiring them to spend more time scrambling around at some part-time job rather than sticking to the books.

As an example, my son just got another $1000 scholarship that he qualified for because of many hours of past work at school and in the community. Filling out the application took less than half an hour. Not a bad return for past work he was going to do anyway and half an hour at the keyboard. This program would tell a student with means and a solid school record to go for the scholarship, which might subsidize his living expenses and would certainly be more efficient than spending many hours flipping burgers. A less affluent student with the same record might feel compelled to skip the scholarships, take the "Covenant Award," and flip burgers for additional funds.

This means the more ambitious, less affluent students will take their chances without the "Covenant Award," risk applying for scholarships they won't get, and hope to earn enough to cover education expenses plus some extra to live on. The less ambitious students will take the "Covenant Award," work more hours to finance miscellaneous expenses, and will be more likely to flunk out after burning through the state money.

This all leads to higher costs for the kind of students we really should be helping stay in state.