Article summary: Since the federal student aid was created by the Higher Education Act of 1965, college tuition has increased 312%. The federal government now distributes $120.8 billion annually through Title IV programs, inflating the market exponentially and contributing to $1.7 trillion in U.S. student debt. Recent studies show this same funding mechanism is now raising private school tuition in states with K–12 voucher and education savings account programs (ESAs).
Why Is College So Expensive?
The question “Why is college so expensive?” plagues millions of students and parents each year. Young people are told they need a college degree to be successful and to make money. But why does that promise come with the price tag of hundreds of thousands of dollars of debt? Has it always been this way, or did something happen to cause prices to spike?
There is a very simple answer. The main cause of increasing tuition prices is the Higher Education Act of 1965.
What Is the Higher Education Act of 1965?
In 1965, President Lyndon B. Johnson signed the Higher Education Act (HEA). The act vastly expanded the federal government’s reach into universities by establishing a framework for federal financial aid, institutional standards, and minority programs for colleges and universities. These programs were designed to lift poor populations out of poverty by giving them access to higher education.
Table One summarizes some general provisions that this act gives to universities around the country.
TABLE ONE: HEA PROVISIONS
| Bill Section | Provision |
|---|---|
| Title I: General Provisions | Defines an “institution of higher education” Sets eligibility standards for federal programs Establishes accreditation requirements Creates the National Advisory Committee on Institutional Quality and Integrity |
| Title II: Teacher Quality Enhancement | Partnership grants for teacher training programs Augustus F. Hawkins Centers for Excellence for minority teacher preparation |
| Title III: Institutional Aid | Financing programs for minority groups, such as Historically Black Colleges and Universities (HBCUs) |
| Title IV: Student Assistance | Federal grants for students and future teachers Free Application for Federal Student Aid (FAFSA) |
Table Two breaks down the number of institutions and students accepting money from the Title IV provisions. The data is reported by the National Center for Education Statistics (NCES) in the 2024 press release “The Total Number of Higher Education Institutions Decreases by 2 Percent” and the Congressional Research Service (CRS) Report Number R48560, “Amendments to the Higher Education Act in FY2025 Budget Reconciliation Legislation.”
TABLE TWO: 2023–24 TITLE IV FEDERAL STUDENT AID RECIPIENTS
| Number of Institutions | Type of Institution | Number of Students | Annually Distributed Aid |
|---|---|---|---|
| 5,819 institutions | 33% are public institutions | Approx. 9.9 million students | Approx. $120.8 billion |
| 29% are private nonprofit institutions | |||
| 38% are proprietary (for-profit) institutions |
These two tables make it clear that HEA establishes many federal funding mechanisms, and it impacts a large percentage of American institutions of higher education. We hoped these programs would benefit students and institutions since they are so expensive. However, there is undeniable evidence that it has only contributed to spiking tuition prices.
Financial Aid = Raised Prices
Economic research consistently shows that a subsidized market creates an inflated market. When the government floods artificial money into a market, it forces the market to inflate in response.
When Did College Become Expensive?
The evidence overwhelmingly shows that that is what happened to tuition prices after the signing of HEA.
- The National Center for Education Statistics reports that in the 1963–64 academic year, public 4-year university tuition and fees cost $243 per year.
- Education Data Initiative found in “College Tuition Inflation Rate” that the public college tuition rate has increased 312.4% since 1963, after adjusting for inflation.
- Intelligent, in its article “1970 vs. 2020: How Working Through College Has Changed,” found that private college tuition increased from $1,706 in 1970 to $37,650 in 2020, a 2,107% increase.
No matter what statistic you turn to, the terrible truth—that U.S. student debt has increased by over 100% over the past 10 years, approximating 1.7 trillion dollars—remains the same. This is because the federal government spends approximately 120 billion dollars annually in the higher education market.
The Predictable Result
This result was even predicted at the time by William Bennett, Secretary of Education in 1987, when he remarked that “Increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that federal loan subsidies would help cushion the increase.”
The Lesson of Higher Education
College is extremely expensive, and it cannot be denied that the reason for ever-rising prices is an ever-subsidized market. Government aid raises prices; it is as simple as that.
The trouble is, legislators across the country are passing school choice programs that would introduce this same rotten funding mechanism into non-public K–12 education, all while promising affordability for families.
States like Texas, Arizona, Florida, Iowa, Nebraska, and many others have school choice policies and studies, such as EdWorkingPaper No. 24-949, “The Effect of Taxpayer-Funded Education Savings Accounts on Private School Tuition: Evidence from Iowa,” which prove that ESA and voucher programs directly cause increased tuition prices for private schools.
Returning to a Better Funding Mechanism
Legislators and voters must learn the lesson of higher education. Are you struggling to put your graduate through college? If you are, you know the pain of steep tuition and the promise of future debt. Do not invite the same system that caused those high prices into K–12 education as well.
It is time that we returned to the old and freeing method of funding: private funding, supported by private benefactors and Christian charity. It has worked throughout history and for hundreds of years in America. We can do it again if we are willing to learn the lesson of higher education and choose better for K–12 schools.
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