Department of Education officials on Monday pushed back against the idea that federal aid to students raises college tuitions, downplaying the results of a recent study by researchers at the Federal Reserve Bank of New York that found that it does.
"If you look at historical data – we've looked at this question very closely – that does quite not seem to be case," Secretary Arne Duncan said on a call with reporters, citing historical data analyzed by his agency.
"Historically, we do not see that correlation," added Undersecretary Ted Mitchell. "[We] continue to be encouraged that states and institutions are not using the federal grant program and aid program as a way of bumping up their own tuitions. But we continue to look at that, it's one of the things we're very concerned about."
The New York Fed researchers found in an analysis published earlier in the month that $1 of added Pell Grants raises tuitions by 55 cents, while an added dollar of subsidized direct loans translates into 65 cents in higher tuition.
Duncan addressed the study Monday amid a push for a renewed focus on accountability and student outcomes in higher education, including a call for states to spend more on ensuring that students graduate.
He sought to clarify that he was not calling on states to spend more on the current higher education system, which he noted has seen tuition double over the past three decades, while the average student loan balance per graduate has doubled since 1992.
"This is not a free lunch for higher education by any stretch," Duncan said.
Duncan said the country must shift the incentives within higher education. The Obama administration's view is that higher state spending, with greater accountability measures, yields lower rates of incompletion. Dropouts are the group worst hit by the increase in student debt, as they are less likely to get high-paying jobs that require degrees and are more likely to default.
"States that take the high road, that take leadership and say that higher education is not only a private good but a public good and the state's economy and health of civil society depends on it, those are the states where you see higher spending, where you see increased levels of completion, lower levels of default," Mitchell said. "And our argument is that's good for everybody."
The department also released state-by-state data showing that the states with the highest completion rates have the lowest rates of defaults on student loans. Massachusetts, with a top graduation rate of 69 percent in 2013, meaning the share of full-time students who graduated four-year college within six years, had a cohort default rate of just 7 percent, versus a national average of 11 percent. With a completion rate of just 29 percent, in contrast, Arizona had a default rate of 18 percent.
The officials also defended the administration's decision not to rate colleges on student success, as President Obama had promised in 2013. The Department of Education said that its online tool would not directly compare colleges in late June.
"We're not backing away from the idea of accountability," Mitchell said, noting that students will still be able to access information about schools' success online in new ways.