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Student Federal Aid to Blame for Increasing Tuition Costs?

Student Federal Aid to Blame for Increasing Tuition Costs?
2/9/2016
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Susan Dutca-Lovell

Some 200 years ago, attending Harvard may have cost roughly $600.50 a year ($8,371 if you adjust for inflation) in comparison to today's cost of attendance of up to $69,600, according to Greg Daugherty. College Board reports the average cost of tuition and fees for the 2015-2016 school year was $32,405 at private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state students at public universities - that's not including room and board, books and supplies, personal, or transportation expenses. What accounts for the tuition increase? There seems to be no definitive answer. However, a new study points to federal student aid, or the pursuit thereof by colleges and universities as the culprit of rising tuition.

The National Bureau of Economic Research reports that between 1987 and 2010, student aid has been the leading cause for college tuition increase. Due to the increased availability of subsidized loans and the appearance of unsubsidized loans, colleges raised tuition knowing that "financial aid will cover the difference," according to Inside Higher Ed. An assistant professor at Indiana University states that "you have to somehow structure it so that colleges can't just increase tuition and capture that money." Some don't buy into this logic - rather they believe that the "college's sticker price is set by its wealthiest student's ability to pay - and the wealthiest students never take out loans." Others blame the lack of state funding or the expense of paying costly faculty salaries.

Some have criticized the study's "hypothetical college" model because it is based on "data from private and public nonprofit institutions" which is a "too-simple way to view a complex problem." In addition to why tuition has to increase, another important question to ask is where is that money going? Not all of endowment money goes towards student aid, and Congress is scrutinizing 56 colleges with large endowments who were "valued in excess of $1 billion as of the 2014 fiscal year." Letters will be sent to these colleges this week, demanding the last five years of financial data as to where the endowment money has been used since the two congressional committees "are not able to accurately assess how colleges and universities are using endowment assets to fulfill their charitable and educational purposes."

Though college tuition is not as low as it was in the 1800's one solution for lowering your college costs and expenses always remains true: scholarships.

Credit attributed to Greg Daugherty, an editor, writer, and editorial consultant with features in TIME Inc., Reader's Digest, Consumer Reports, and other publishers.

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