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U.S. must act to rein in soaring college tuition

Almost alone, President Obama seemed to have grasped the core problem with college loans last January.

Against a backdrop of 4,000 cheering students in maize and blue at the University of Michigan, he proposed that Congress link increases in federal aid to colleges to their ability to rein in college tuition.

A great idea. It comes closer to the core of the student interest rate issue than whether interest should be double what it has been for the last five years.

Here is a "which came first, the chicken or the egg" question:

Are students facing five-figure student loan burdens because of interest rates, or have colleges and universities goosed tuition rates to stratospheric levels to grab off all of the federal generosity to our students?

Tuition hikes higher than the inflation rate -- right through the Great Recession -- parallel increases in loan eligibility, cuts in interest rates and relaxed eligibility standards, according to studies by the U.S. Government Accountability Office and the CollegeBoard Advocacy & Policy Center. More on that later.

This sharp upward bend in the tuition curve matches what has happened with health care costs, including prescription drugs. Prices soared with the passage of Medicare, Medicaid and Medicare Part D. This is what happens when the government creates a benefit and fails to place hard caps on prices.

Smarty-pants call this "reverse price theory."

Hold on. The simple price theory of supply and demand taught in school insists that prices drop when the availability of a product increases. But the opposite is true when the government begins bankrolling an emotional goodie like a college degree or "free" health care.

For example, the private-public arrangements on Part-D with Pfizer, Merck and other influential drug makers are loading the federal deficit. Presidents George W. Bush and Obama refused to impose a cap on drug prices. Paying for spiking tuitions and fees is piling massive debts on young people.

In many cases, these debts are like high blood pressure -- a silent killer.

This is why Democrats, hoping to arouse younger voters who may have cooled on Obama, suddenly hoisted the issue of student loan interest. The 2007 law cutting rates in half expires June 30.

House Speaker Nancy Pelosi, D-Calif., could have passed an extension any time between 2007 and 2010. And she could have insisted tuitions be capped, or contained, or something. Obama could have made the same proposals after 2009. Interest rate legislation is momentarily in limbo, a campaign device.

Keep in mind a higher rate would apply only to new student loans. But the rate fight in Congress is a distraction from the brutal facts of tuition and fees, greed actually, at federal aid at colleges and universities, which includes every one of them.

CollegeBoard reports tuition and fee increases at public colleges were 11 percent higher than inflation in 2002-03, and 9.3 percent beyond inflation in the depths of the recession in 2009-10. Even before that, the GAO reported, college prices increased three times faster than average household income between 1981 and 1996. Recently, the bills at private colleges have risen about 5.5 percent a year.

Now, costs at elite private residential schools top $62,000 a year. Can anything unwind the interlocking mesh of federal scholarships, loans, and tuitions and fees?

What happened to the terrific idea voiced by the president at Ann Arbor three months ago? Apparently, nothing. No member of Congress has proposed a bill on it. Higher education lobbyists have a grip on Washington as tight as the drug makers. Or perhaps, the members are holding out for an honorary doctorate or a commencement speech.