ERIC Number: ED420268
Record Type: RIE
Publication Date: 1998
Federal Student Aid and Tuition Growth: Examining the Relationship.
Hauptman, Arthur M.; Krop, Cathy S.
A debate has raged over the effect of federal student aid on tuition growth. Former Secretary of Education, William Bennett claimed that colleges and universities explicitly take federal aid into account in setting tuition and other charges, thereby stimulating tuition increases that are higher than the rate of inflation. An alternative view is that increases in federal aid, particularly loans, is not the main cause of tuition growth. The proportion of total college attendance costs met through federal student loans has increased dramatically over the past two decades, growing from less than 10 percent in the public sector and 20 percent in the private sector in 1975 to nearly 50 percent in the public sector and close to 40 percent in the private sector in 1995. During the same period, aid provided by institutions' own resources grew from just over 5 percent to nearly 20 percent. The tremendous growth in federal loans has made it easier for institutions to raise tuition at twice the rate of inflation without experiencing decreases in enrollment; because of their smaller, relatively stable share, federal grants have had less impact on college pricing decisions. To moderate tuition increases without impinging on colleges' autonomy, the federal government could determine student eligibility for loan subsidies based on partial costs, create an annual limit on federal aid, or establish performance-based regulatory relief. (MAB)
Descriptors: Economic Impact, Educational Economics, Eligibility, Federal Aid, Financial Policy, Financial Support, Grants, Higher Education, Paying for College, Student Financial Aid, Student Loan Programs, Tuition
Council for Aid to Education, 342 Madison Avenue, Suite 1532, New York, NY 10173; phone: 212-661-5800; fax: 212-661-9766; http://www.cae.org
Publication Type: Reports - Research
Education Level: N/A
Authoring Institution: Council for Aid to Education, New York, NY.