HIGHER EDUCATION BUBBLE UPDATE: Lessons In College Costs For Clinton & Sanders.

But even if we assume that higher education really is too expensive, we face a second conceptual difficulty: Subsidies may not make college significantly cheaper. Although the relationship between the level of aid available to students and the level of tuition has been controversial, this study released in July by economists at the New York Fed is persuasive. The authors found fairly robust effects, with an increase of 60 to 70 cents in tuition for each dollar increase of subsidized student loans. The effect was stronger at private colleges than at public schools, and, among private colleges, was least pronounced at those accepting the smallest proportion of applicants. As these tend to be the schools with the largest endowments, the effect is not entirely surprising.

The Clinton and Sanders plans are aimed principally at public colleges, where out-of-state tuition already rises with the size of Pell grants. One reason in-state tuition doesn’t capture the subsidies is political pressure from residents. So maybe the flood of new federal money would have no effect. On the other hand, given the growing need to compete with the wealthier schools in the educational “arms race of spending” — for example, to hire or retain top faculty — there’s a fair chance that we’d see some significant increases.

Of course it’s possible (some would say likely) that the web of regulations accompanying the grants under both programs would include implicit price controls. I’m no fan of this idea, but lots of smart people think I should be.

Finally there’s the Scottish experience. In 2001, Scotland began the process of abolishing tuition, a goal essentially accomplished in 2008. In a recent Vox article, Libby Nelson pointed to research showing, among other things, that although the change led to an increase in applications, the children of the poor still attend college at relatively low rates. In other words, what has been holding them back might not be the cost.

Read the whole thing.