Delisle 1

The Impact of Government Aid, or Lack Thereof, on the Rising Cost of College.

By Hudson Delisle April 1, 2019

A bachelor’s degree from a university has increasingly become a basic need to have long term

success in the job market.1 With an increasingly competitive job market, higher education is becoming

essential to climbing the corporate ladder and having a successful career.2 In addition, it is estimated that

graduates with at least a bachelor’s degree make $2.1 million more dollars over the course of their

lifetimes compared to the $1.2 million average earnings for people with just a high school diploma over

their lifetime.3 The gap between the wages of a family of two college graduates and a family of high

school graduates grew by $30,000 from 1979 to 2012.4

Further, the unemployment rates for college graduates floats around 2.1 percent, whereas the

unemployment for high school grads is around 3.9 percent, down from 5.0 percent a year prior.5 In the

last twenty-five years, unemployment for college graduates with a bachelor's degree or higher has peaked

at five percent, whereas those with only a high school education have seen unemployment peak at 11

percent. The opposite statistic, employment, finds that in recent years college graduates with a bachelor’s

degree or higher have employment rates of 86 percent. On the other hand, those who only have a high

school education have averaged an employment rate of 72 percent.6

Higher education provided for individuals has external benefits for society as well. More

education results in a stronger democracy, diffusion of technology, and less crime and poverty.7 High

amounts of education allow for greater development of public and private civic institutions which, over a

period of time, strengthen democracy.8 With more education, research, and understanding, society as a

whole is able to make more educated decisions and spread the educational benefits that overflow to those

who choose not to go to college in the form of research and economic growth. The average benefits of

higher education not only help individuals, but society as a whole. Said benefits are unmatched by the

average benefits of those with a high school education or lower.

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However, these benefits do not come without a cost. For an example, total college revenue of

public and private institutions in the 2015-2016 school year amounted to $564 billion dollars.10

Government census data implies that of the sixteen million students enrolled in college,11 24.4 percent of

students are paying for college completely on their own and 64.6 percent are having to cover some part of

their education. Students who wish to gain a higher level of education but cannot afford it are forced to

obtain a loan either from a bank or the federal government, amounting to roughly $93,750 per student.

In the past, state funding of public schools has allowed them to maintain low and competitive

prices. However in recent years, that funding has been greatly reduced, forcing institutions to cover the

costs through higher prices.12 As a result, the total amount of student debt has reached $1.5 trillion and is

expected to climb to $1.53 trillion by the end of 2019.13

Although a multitude of other factors are causing college costs to rise at an unaffordable rate, the

research conducted in this brief will focus mainly on the two main factors of growing federal aid and how

institutions are taking advantage of it, as well as the damage done by the cuts in state funding to public

institutions. This brief surveys the two factors, how they are the main causes of the inflationary cost of

higher education, and realistic actions that can be taken at the federal, state, and personal level to make

college more affordable.

In 1987, colleges earned nearly three times more

funding per student from local and state governments than

from tuition.14 As of 2013, public schools received nearly the

same amount of revenue from tuition as they did from local

and state government funding.15 Public universities in 1987

saw tuition per student averaging roughly $3,600 in 2013

dollars,16 whereas roughly 26 years later tuition per student has

risen to $9,300 in 2013 dollars.17 As of 2016, the average American income was $59,039, where the total

in state cost of tuition and room and board averaged at $20,770, over one-third of the average income.18
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From 1987 to 2017, the average cost of college has risen 8% over the rate of inflation, making it

increasingly more unaffordable.19

Universities in the United States argue that the rising costs in tuition help their quality of

education grow.20 Public institutions are able to update their base staff salaries, facilities, and programs

with the increases in costs.21 These costs of growth and updating public universities were originally

covered by the aid supplied by local and state governments.22 However, as this funding decreases over the

years, institutions are forced to make the students cover the costs.23 In addition, they are able to shape

their student bodies through scholarship programs.24 For instance, an institution may give more

scholarship or aid to the students they want at their school and no scholarship or financial aid to one they

wish to deter from attending their school.25 The more unaffordable a college may be, the easier it is for

colleges to use this tactic.

Experts also claim that universities in the United States are more willing to experiment with

raising their prices because of federal government aid.26 In 2015, there was over $180 million in financial

aid available to undergraduates who needed

aid getting into college, $120.6 million of

that financial aid was federal grants and

loans.27 According to the National Bureau of

Economic Research, federal student aid is the

main cause behind the rapid increases of

tuition from 1987 to 2010.28 The more

students can borrow from government

programs, the more higher education

providers are able to charge.

The ease of gaining these federal loans allows institutions to manipulate their prices and costs of

attending.29 For example, to apply for federal loans in the United States, one needs a Social Security

number and, if they are a male, need to be signed up for the draft. Every United States citizen is able to
 Delisle 4

apply for these loans, regardless of income. The amount received depends on household family income.

Larger grants are given to students who have a household income of less than $50,000, with the biggest

sums going to those who make less than $20,000.30 However, direct federal loans are expected to be as

high as $1.1503 trillion, given to about 34.2 million borrowers, adding up to about 67.5% of the total

number of students enrolled in a university or about $33,634.50 per borrower.31 With the majority of

students gaining aid from the federal government, the manipulation of tuition in order to gain more funds

is being used by the majority of colleges.32

The Higher Education Act of 1965 is responsible for the authorization of most of the Federal

student aid programs available today, as well as the creation of the National Association of Student

Financial Aid Administrators in 1966.33 These programs allow students to earn aid based on research,

work study, and low economic ability through the federal government and were passed during Lyndon B.

Johnson’s presidency.

The most important explanation for the cause of unaffordable and the rapid rising costs of college

are the rises in federal aid and the fall in financial aid provided by the states to the universities. It is

measured that the combination of them have caused tuition to rise faster than inflation, at times nearly 8%

year over year, for the past thirty years.34 However, completely funding schools through state aid would

cause a loss in quality education and a large tax hike to compensate for funding. However, this would still

not be enough for universities to renovate and upgrade their facilities, as well as provide quality

education.35 If federal aid was abolished, there would be a decrease in demand and less external benefits

to society.36 Although both solutions would make college and university more affordable, programs

would be forced to be cut at universities in order to make up lost funds.37

New York has lead the way in increasing the affordability of colleges. Their State University of

New York program, SUNY for short, has lowered their cost of college by nearly one third.38 Created to

allow more opportunity and access to students in need, SUNY has 64 institutions that serve nearly 1.3

million students,39 through the Excelsior scholarship. To qualify, students must be a New York resident

and must live in New York for the amount of time they attended school. The schools are then refunded
 Delisle 5

the following years through state taxes, which is why alumni are required to stay in New York for the

same time they had the scholarship.40 However, this program restricts alumni’s freedom to movement in

the years following their scholarship, which serves as a weakness for the state program.

At the international level, many countries have taken to the idea of free college. For an example,

Germany has abolished tuition at universities in all 16 of its states.41 Through dual education, a concept

where public institutions and private corporations are held accountable for education Germany has

lowered the demand for education and created more jobs that do not require skills-based activities that are

gained at universities.42 This has helped Germany's economy, as their unemployment rate declined during

the Great Recession, rather than increased.43 However, this policy disvalues education in Germany, as it

causes less demand for a degree and graduates with a degree.44 Due to the drop in demand, the quality of

education falls as there are less funds used at the universities.45 In order for the United States to maintain

the top universities in the world, there still must be some form of payment in order to grow and keep the

quality of education.

Another example is Denmark, where students are being paid to go to college.46 Students receive a

check for $900 every month from the government for going to school and it is increasing the demand and

value of education in Denmark.47 Top students are even paid more for their accomplishments in the

classroom, giving students an incentive to learn.48 Denmark is able to do this and still have tuition free

college through their similar policy of dual education. Their education is publicized, while they also

receive a check monthly from the government. However, this still allows for a drop in the quality of

education because of the lack of funds being provided by the students and a high tax rate.49

There are obvious solutions to fix the problem of unaffordable college in the United States,

however, they either degrade the value and quality of higher education, or limit it to a select

demographic.50 In order to maintain high quality education as well as hold the importance of a college

degree while lowering college costs, action needs to be taken by the federal government, state

government, and students themselves.

 Delisle 6

For starters, the Federal government could greater restrict their financial aid eligibility. In doing

so, less federally loaned money will be granted. Expensive universities will need to lower their costs or

award more grants and scholarships to make their school more affordable in comparison to other

schools.51 The funding that the federal government would usually give out to individuals can be dispersed

among the states for funding for their public universities. These public universities would no longer need

to charge higher tuition in order to renovate and maintain facilities because of the new bump in public

funding they would receive.

Further, similar to the State University of New York schools, alumnis who graduated from public

universities can be taxed by the federal government to lower tuition costs. Creating a nationwide program

similar to SUNY will allow more funding to public schools and decreased costs in tuition. Further, it

omits individuals who go to private schools or choose not to go to college by taxing public university

alumni after their graduation. However, extra taxation will act as an incentive for people not to go to

public college. This may decrease the demand for college degrees, ultimately lowering the price of public

college without degrading the quality of education.

As for state governments, similar policies like SUNY schools can be created in each state.

Although this restricts the freedom to movement for individuals who choose to go to schools in this

program, it will decrease the cost of in state tuition by nearly one third.52 Those who wish to go to public

universities in state will be able to and at a much cheaper cost. Competing private universities will need to

lower their tuition and costs or greatly increase their quality of education in order to compete with schools

in these programs. However, lower populated states will need to have higher taxes in respect higher

populated states to make up enough funds for the program. Lower populated states may not be able to

have programs similar to SUNY for this reason. However, the federal government could help these

smaller states with funding to help create programs like SUNY in lower populated states.

Individuals who wish to attend college can do so at discounted costs through a multitude of

strategies. Commuting to local colleges eliminates the extra costs of room and board. Additionally, almost
 Delisle 7

every university offers online classes.53 This allows students to take classes at a non-local school while

simultaneously cutting the costs of room and board.

In all, federal governments, state governments, and individuals can work to lower the cost of

higher education through regulation, policy implementation, and self-action. With growing demand and

benefits from higher college education, prioritizing lower costs of education need to be a priority in order

to maintain a society with a healthy amount of debt. Higher education has the capability of improving the

lives of individuals and society as a whole, yet is increasingly becoming less available to the average

American. The impact of education allows for the convenience of more research and growth in a society,

and should not be treated as a luxury, but as an opportunity to better oneself and the area around them.

Governments at the local and state level must implement policy and regulations for federal aid and rising

costs in college in order to ensure that every American has a fair chance at the opportunity to affordable

college. Public and private universities need to restrict their manipulation of federal loans and individuals

who are having to cover the extra costs and sinking themselves in debt by doing so. Although there are a

multitude of reasons why tuition and the cost of colleges are rising at a rapidly higher rate than inflation,

lack of state funding and federal aid are the two main reasons why it is increasingly becoming an issue for

the modern American to pay off within a reasonable amount of time and without putting oneself into debt.
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Endnotes

1. Krakoff, Sonya. "How Important Is a College Degree in 2018?" Champlain College Online.
Accessed March 30, 2019.
2. Ibid.
3. Ibid.
4. Porter, Eduardo. "A Simple Equation: More Education = More Income." The New York Times.
September 10, 2014. Accessed March 28, 2019.
https://www.nytimes.com/2014/09/11/business/economy/a-simple-equation-more-education-
more-income.html.
5. "Unemployment Rate 2.1 Percent for College Grads, 3.9 Percent for High School Grads in
August 2018." U.S. Bureau of Labor Statistics. September 12, 2018. Accessed March 30, 2019.
https://www.bls.gov/opub/ted/2018/unemployment-rate-2-1-percent-for-college-grads-3-9-
percent-for-high-school-grads-in-august-2018.htm?view_full.
6. "The NCES Fast Facts Tool Provides Quick Answers to Many Education Questions (National
Center for Education Statistics)." National Center for Education Statistics (NCES) Home Page, a
Part of the U.S. Department of Education. Accessed March 30, 2019.
https://nces.ed.gov/fastfacts/display.asp?id=561.
7. McMahon, Walter W. "The External Benefits of Education." ResearchGate. December 2010.
Accessed March 28, 2019.
https://www.researchgate.net/publication/286620724_The_External_Benefits_of_Education.
8. Ibid.
9. "Why Is College Tuition Rising So Much? And What Can You Do?" Cornerstone University.
March 5, 2018. Accessed March 31, 2019. https://www.cornerstone.edu/blogs/lifelong-learning-
matters/post/why-is-college-tuition-rising-so-much-and-what-can-you-do.
10. "Post Secondary Institution Revenues." The Condition of Education - Postsecondary Education -
Finances and Resources - Postsecondary Institution Revenues - Indicator May (2018). Accessed
March 31, 2019. https://nces.ed.gov/programs/coe/indicator_cud.asp.
11. Torres, Monica. "Majority of College Students Are Working and Paying Their Own Tuition."
Ladders. June 05, 2017. Accessed March 31, 2019. https://www.theladders.com/career-
advice/college-students-working-tuition-survey.
12. "The Real Reasons Why College Tuition Is So High and What You Can Do About It." The
Scholarship System. March 12, 2019. Accessed March 27, 2019.
https://thescholarshipsystem.com/blog-for-students-families/the-real-reasons-why-college-tuition-
is-so-high-and-what-you-can-do-about-it/#Where_Did_the_Student_Loan_Crisis_Originate.
13. "Student Loan Debt Clock." Student Loan Hero. Accessed March 26, 2019.
https://studentloanhero.com/student-loan-debt-clock/.
14. Berman, Jillian. "State Colleges Receive the Same Amount of Funding from Tuition as from
State Governments." MarketWatch. March 25, 2017. Accessed March 26, 2019.
https://www.marketwatch.com/story/state-colleges-receive-the-same-amount-of-funding-from-
tuition-as-from-state-governments-2017-03-24.
15. Ibid.
16. Ibid.
17. Ibid.
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18. "Why Tuition Is Rising." Best College Values. Accessed March 31, 2019.
http://www.bestcollegevalues.org/why-tuition-is-rising/.
19. Ibid.
20. Ibid.
21. Ibid.
22. "The Real Reasons Why College Tuition Is So High and What You Can Do About It." The
Scholarship System. March 12, 2019. Accessed March 31, 2019.
https://thescholarshipsystem.com/blog-for-students-families/the-real-reasons-why-college-tuition-
is-so-high-and-what-you-can-do-about-it/#Where_Did_the_Student_Loan_Crisis_Originate.
23. Ibid.
24. "Why Tuition Is Rising." Best College Values. Accessed March 31, 2019.
http://www.bestcollegevalues.org/why-tuition-is-rising/.
25. Ibid.
26. "Why Is College Tuition Rising So Much? And What Can You Do?" Cornerstone University.
March 5, 2018. Accessed March 27, 2019. https://www.cornerstone.edu/blogs/lifelong-learning-
matters/post/why-is-college-tuition-rising-so-much-and-what-can-you-do.
27. Ibid.
28. "The Real Reasons Why College Tuition Is So High and What You Can Do About It." The
Scholarship System. March 12, 2019. Accessed March 28, 2019.
https://thescholarshipsystem.com/blog-for-students-families/the-real-reasons-why-college-tuition-
is-so-high-and-what-you-can-do-about-it/#Where_Did_the_Student_Loan_Crisis_Originate.
29. Ibid.
30. "State and School FAFSA® Deadlines: Do You Know Yours?" Federal Student Aid. Accessed
March 31, 2019. https://studentaid.ed.gov/sa/.
31. "U.S. Student Loan Debt Statistics for 2019." Student Loan Hero. Accessed March 28, 2019.
https://studentloanhero.com/student-loan-debt-statistics/.
32. "The Real Reasons Why College Tuition Is So High and What You Can Do About It." The
Scholarship System. March 12, 2019. Accessed March 28, 2019.
https://thescholarshipsystem.com/blog-for-students-families/the-real-reasons-why-college-tuition-
is-so-high-and-what-you-can-do-about-it/#Where_Did_the_Student_Loan_Crisis_Originate.
33. "FinAid for Educators and FAAs | History of Student Financial Aid." FinAid. Accessed March
31, 2019. http://www.finaid.org/educators/history.phtml.
34. "Why Tuition Is Rising." Best College Values. Accessed March 26, 2019.
http://www.bestcollegevalues.org/why-tuition-is-rising/.
35. Ibid.
36. Ibid.
37. Ibid.
38. Suny. "Tuition and Fees." Tuition and Fees - SUNY. Accessed March 25, 2019.
https://wayback.archive-it.org/all/20171022012655/https://www.suny.edu/smarttrack/tuition-and-
fees/.
39. Ibid.
40. "Tuition-Free Degree Program: The Excelsior Scholarship." Welcome to the State of New York.
December 19, 2018. Accessed March 29, 2019. https://www.ny.gov/programs/tuition-free-
degree-program-excelsior-scholarship.
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41. "How Germany Made Higher Education Free." Affordable Schools. Accessed March 31, 2019.
https://affordableschools.net/germany-free-education/.
42. Ibid.
43. Ibid.
44. Ibid.
45. Ibid.
46. Noack, Rick. "Why Danish Students Are Paid to Go to College." The Washington Post. February
04, 2015. Accessed March 31, 2019.
https://www.washingtonpost.com/news/worldviews/wp/2015/02/04/why-danish-students-are-
paid-to-go-to-college/?noredirect=on&utm_term=.3dad4042b9a5.
47. Ibid.
48. Ibid.
49. Ibid.
50. Long, Heather. "By Age 3, Inequality Is Clear: Rich Kids Attend School. Poor Kids Stay with a
Grandparent." The Washington Post. September 26, 2017. Accessed March 30, 2019.
https://www.washingtonpost.com/news/wonk/wp/2017/09/26/by-age-3-inequality-is-clear-rich-
kids-attend-school-poor-kids-stay-with-a-
grandparent/?noredirect=on&utm_term=.5d84d64a5acd.
51. "Survey: Americans Say College Is Important but Want Cheaper, More Flexible Programs."
Survey: Americans Say College Is Important but Want Cheaper, More Flexible Programs.
Accessed March 31, 2019. https://www.insidehighered.com/news/2013/02/06/survey-americans-
say-college-important-want-cheaper-more-flexible-programs.
52. Suny. "Tuition and Fees." Tuition and Fees - SUNY. Accessed March 27, 2019.
https://wayback.archive-it.org/all/20171022012655/https://www.suny.edu/smarttrack/tuition-and-
fees/.
53. "Why Is College Tuition Rising So Much? And What Can You Do?" Cornerstone University.
Accessed March 28, 2019. https://www.cornerstone.edu/blogs/lifelong-learning-
matters/post/why-is-college-tuition-rising-so-much-and-what-can-you-do.