What bothers me so much about this statistic is that colleges can keep the price of tuition higher than what it would have possibly been if the student loans weren't there in the first place.I remember my state of mind when writing "somewhat false signals." I was too nice. They are false signals.
University planners, knowing that financial aid is guaranteed, plan expansion based on somewhat false signals in the markets (federal grants, student loans). It does not matter how big or small the false signal.
Excerpted from Rollback:
Of course, it is the subsidies themselves that push tuition costs ever higher. Here’s the obvious point everyone pretends not to realize: colleges know the students have access to low-interest loans courtesy of government. Aware that prospective students enjoy artificially increased purchasing power, college administrations raise tuition (and cut back their own aid programs) accordingly. When tuition thus continues to rise, as any fool could predict, we hear huzzahs for the government – for however could students pay this high tuition without government assistance? It is the classic case, as Harry Browne said, of the government breaking your leg, handing you a crutch, and saying, “See Without me you couldn’t walk.”Thomas Woods, The Student Loan Racket: Ron Paul Right Again