NCPA - National Center for Policy Analysis

Federal Policies Raise Tuition Prices

January 27, 2015

Since 1980, tuition at public and private universities has grown more than twice as fast as the rate of inflation. In a publication from the Heritage Foundation, Lindsey Burke explains how student loans and grants are contributing to the rising cost of higher education.

Federal loan and grant programs only encourage schools to raise their tuition costs. Aid is available to students regardless of a student's ability to repay, and schools -- knowing that would-be students will have access to federal loans -- have little incentive to keep their costs down. What's resulted?

  • Sixty percent of graduates with bachelor's degrees have more than $26,000 in student loan debt when they leave school.
  • Today, student loan debt is more than $1 trillion.

Unfortunately, Burke says lawmakers have turned to misguided policies to combat the student loan problem. For example, income-based repayment plans -- which allow students to repay their loans based on their income -- do nothing to push costs downward. Students are desensitized to cost increases because their loan repayments are kept in check by their incomes. Moreover, these policies forgive outstanding balances after 25 years. For students who take government jobs, their loans are forgiven after just 10 years.

Just recently, the NCPA published a report by Research Associate Farhad Mirzadeh on rising education costs. Mirzadeh explained that skyrocketing tuition prices have not resulted in additional spending on instruction, rather schools have seen an explosion in administrative spending.

Source: "Opportunity for All, Favoritism to None," Heritage Foundation, 2015.  


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