College financial aid punishes thrifty families

http://collegeaffordability.blogspot.com/2008/02/dysfunctional-college-financial-system.html ^ | February 17, 2008 | Richard Vedder

[reaganaut1]

[College financial aid] punishes the savers, rewards the spenders. It rewards parents who are so self-centered that they put their own interests ahead of their children, and punishes parents who believe their first obligation in life is to nurture and support their kids. The system sends all the wrong signals. It is bad for the Nation, contributing to our low savings rate, the need to borrow investment funds from abroad, etc. It raises interest rates, other things equal. The damage done by government through tax and spending policies is aggravated by the privately imposed "tax" on savings levied by the colleges and universities. That is why I think a decent case can be made to abolish the FAFSA form.

[reaganaut1]

Vedder is an economist who understands that throwing more government money at colleges pushes costs higher. He wrote the books "Going Broke by Degree: Why College Costs Too Much" (2004) and co-authored "Out of Work: Unemployment and Government in Twentieth-Century America" (1997).

Democratic plans to "make college affordable" will probably increase the implicit tax on thrifty families.

[dfwgator]

But the dirty little secret is that the government doesn’t want us to save, they want us to spend, spend, spend to keep the economy afloat.

[doodad]

Boy does this hit home. I set up a 529 and a trust fund for my daughter years ago. As we approach college, the dirty truth came out. I cashed out the trust fund last year and used it to get her first car. Better I take the hit in taxes than she get dinged for having assets. I was hoping to keep it a secret until her wedding so she could pay on a house. Oh well.

We are already tight. College is an emotional and fiscal ordeal.