Do Subsidies Increase or Decrease Costs?

I guess this is debatable (who knew?). Federal college aid has risen 165% over the past decade, and college and college costs have risen about 74% over that same period. Yet some think that increased costs are from our stingy federal government.  For example, Jesse Jackson over at Huffpost notes:

College tuition is soaring because the state contribution to budgets is being slashed

Obama has a plan to increase aid in response. The Obama administration has already taken a series of steps to expand the availability of grants and loans and to make loans easier to pay back, proposed extending the tuition tax break and keep loan interest rates artificially low. Even Ron Paul is for specialized tax credits for college. It’s hard to blame politicians for doing what sells. Given that Krugman tendentiously presents data, ignoring the increasing irrelevancy of the full-tuition price and other issues, its possible to hold such beliefs by referencing properly credential authorities.

When you subsidize something, you shift out demand which causes quantity and price to increase. It simply isn’t true that prices rise due to fewer government subsidies.