Cutting student aid would lead to lower tuition prices. More importantly, it would probably lead to completely different kinds of educational institutions. If students and their families had to more directly bear the costs of their educations, they would be more motivated to seek the best values.
By making college education artifically cheap, government discourages competition and innovation.
The best example are primary and secondary public schools which typically are completely free to a student. A private school, even if it delivers a much better educational value, has a hard time competing because if it charges anything, it's already more than what the student has to pay to attend public school.
The only way for private schools to compete in such an environment is to offer something the public school doesn't offer. A private school cannot compete by offering the same thing the public school offers but just at a lower price.
RE: private schools, assuming you're referring to primary/secondary school as opposed to universities (where private schools thrive).. do you know how Charter Schools work? Ever seen some of the state laws regarding those? In many states, charter schools actually get to operate with a financial advantage over the public schools. I used to be in public office and watched a Charter school take advantage of the laws to siphon a ton of resources from our public school (which was already cutting teacher headcount year over year because of healthcare costs), and then to add insult to injury we had to pay to bus the kids there.
Anyways, back to the larger point.. I put a very high value on the idea that anyone in America, if they have a little talent and put in some work, can get a college education and make their own destiny.
That particular dynamic has way bigger implications for American competitiveness than moderate price distortions in university tuition -- I mean, if we can fix those, great, but let's not throw out the baby with the bathwater, and burn our house down afterwards for good measure.
By making college education artifically cheap, government discourages competition and innovation.
The best example are primary and secondary public schools which typically are completely free to a student. A private school, even if it delivers a much better educational value, has a hard time competing because if it charges anything, it's already more than what the student has to pay to attend public school.
The only way for private schools to compete in such an environment is to offer something the public school doesn't offer. A private school cannot compete by offering the same thing the public school offers but just at a lower price.