Federal Aid’s Role in Driving Up Tuitions Gains Credence. View long held by conservatives is being adopted by more mainstream economists; New York Fed study faults government aid for letting colleges boost prices.

The Wall Street Journal reports:

Imagine a scenario in which the federal government helps households pursue the American dream with ultra-loose credit, only to see prices skyrocket and families take on loads of debt they can’t repay.

Yes, it sounds like the housing market of a decade ago, but some say it is also the challenge of today’s higher-education system.

The federal government has boosted aid to families in recent decades to make college more affordable. A new study from the New York Federal Reserve faults these policies for enabling college institutions to aggressively raise tuitions.

The implication is the federal government is fueling a vicious cycle of higher prices and government aid that ultimately could cost taxpayers and price some Americans out of higher education, similar to what some economists contend happened with the housing bubble.

Imagine that.