Regulating financial aid

May 28, 1991

The Justice Department ought to have better things to do than badger private colleges about how they distribute student financial aid. Last week the department claimed a major victory against eight Ivy League colleges and universities after bludgeoning the schools into signing a consent decree in which they agreed to stop sharing information about how much financial aid they award to offset tuitions ranging from $18,000 a year upward.

Atty. Gen. Richard Thornburgh personally announced the "agreement" -- we put that word in quotes because the schools were facing a ruinous court battle with the government if they didn't knuckle under -- as a triumph of his department's "anti-trust" efforts. We put that last phrase in quotes, too, because Thornburgh would have us believe the colleges were behaving like automakers or soap manufacturers who secretly collude to gouge unsuspecting consumers.

In fact, the schools had been openly sharing such information for years. What's more, they made a point of telling applicants exactly what they were doing and why. They argued, persuasively, that such sharing enabled them to give scholarships based solely on need, while discouraging students from choosing one school over another purely on the basis of the amount awarded.

Thornburgh called that a form of unfair price-fixing. He wants school aid, like prices for cars or soap, to follow strict market rules. But what we are talking about is essentially charity -- that is, something which, by its very nature, is most emphatically not intended to work according to the rules of the market.

That is why the schools are perfectly justified in agreeing among themselves how to give -- not sell -- the service they offer -- education -- most efficiently, i.e. so that it benefits the largest possible number of needy students. The market, by definition, is totally incapable of doing this.

But since there is only a finite amount of aid money available, forbidding schools from agreeing to limit the criteria for receiving aid to need -- which the schools have learned from experience is the most efficient way to distribute a finite resource -- will likely have the effect of triggering a bidding war whose end result will be that the same amount of aid money simply ends up going to fewer students. It is a measure of Thornburgh and the Bush administration's cynicism on education matters that they profess to see nothing at all "unfair" about that.

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