Why the Feds Are to Blame for Rising Student Tuition Costs

Last month, thousands of students graduated from colleges and universities across the country. But while they now move on from campus life, many of them won’t be able to escape the massive amounts of student loan debt they’ve contracted.

As the price of a college education continues to skyrocket, students are taking out more and more loans to pay their tuition. As a result, the level of outstanding student loan debt in the U.S. has reached $1.3 trillion. That’s trillion with a “T.”

Some claim that the solution to curb the rising cost of higher education is for states to provide more funding to colleges and universities. However, a new study by the American Enterprise Institute shows that state funding for higher education has very little to do with preventing tuition from rising.

Writing in the Wall Street Journal, the study’s author, Preston Cooper, explains that the relationship between “tuition and direct state funding changes at four-year public colleges between 2004 and 2015 … is quite weak.”

“Less than 5 [percent] of changes in state funding pass through to higher tuition,” Cooper says. “In other words, if funding falls by $100 per student, tuition will rise by less than $5.”

The real driver behind college tuition increases is not a lack of state funding, but rather subsidies from the federal government.

A study from the National Bureau of Economic Research found that the Federal Student Loan Program accounted for 102 percent of the 106 percent rise in college tuition from 1987 to 2010. This is because universities have more confidence in the federal government than in students to pay hefty tuition, so they raise the prices accordingly. Meanwhile, students are forced to pick up the tab.

When government sends subsidies to colleges and universities, the money often gets lost to programs that aren’t related to education, Cooper explains. Therefore, instead of copying the federal government’s mistakes, Copper advises state governments to give money “directly to students as financial aid.” Doing so, he says, will help reduce the amount of debt that students take on by empowering them to use that aid for education.

It’s beyond time for policymakers to get serious about making college more affordable. There are several solutions out there, but turning off the Washington subsidy spigot is a great place to start.

Author Generation Opportunity

More posts by Generation Opportunity