Jennifer Majorana and James M. Hohman, Mackinac Center for Public Policy
If college affordability is a crisis, is the answer to throw more money at the problem?
When passing the state budget in June, lawmakers set aside $250 million for a scholarship program but did not sketch out the details.
Now, they’ve approved a program that will provide $5,500 annually for students attending state universities for up to five years and $2,750 annually for students attending community college for up to three years. Eligibility is based on income, but the cutoff is high: students whose families make $120,000 or less annually would likely qualify.
Calling the grants “achievement scholarships” is a misnomer since there’s little one needs to achieve to receive one — beyond graduating from high school and enrolling in an eligible postsecondary institution.
As a policy strategy, there are benefits to funding students directly rather than giving money to colleges and universities. Schools are more incentivized to compete for students when funding is attached to enrollment.
Nevertheless, giving more money to higher education won’t make college more affordable.
This scholarship program does nothing to encourage colleges to lower their costs. In fact, it does the opposite. It partly shields students from the costs and encourages more price hikes for higher education.Cost matters because that’s what drives tuition increases. State universities spent $14,400 per student back in 2000-01, and this increased to $28,300 in 2020-21. That’s a 31% increase above inflation.
If lawmakers want schools to charge less in tuition then they should encourage schools to lower their costs. The schools are not going to do that unless students make decisions about which university to attend based on tuition. The scholarship covers up that problem and makes it less likely for students look for high quality, low cost degrees.
The new program will cost taxpayers an additional $250 million in 2023, and lawmakers authorized additional spending of $50 million per year for another five years. That could potentially equate to more than $562 million in spending through the 2027-28 fiscal year. The state already spends an average of $1.9 billion per year on higher education.
The effort to fund students directly is noteworthy. However, throwing additional student-based funding on top of institutional funding is a recipe for even higher tuition.
One piece of good news: Whether to continue the program is up to future legislators.
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Jennifer Majorana is assistant director of advancement for the Mackinac Center for Public Policy. James M. Hohman is the director of fiscal policy at the Mackinac Center for Public Policy.
