College tuition and the debt attached to it has been a hot topic among students, and more recently, among politicians. The prevailing idea among politicians and the general public was that increasing federal aid, including loans and grants, would eliminate the prices students would have to pay due to the increase in overall tuition, but studies show that federal loans and grants, which are designed to help students, may actually harm them. This is partially due to a mentality among politicians that if federal aid is given to students, then it will mutually benefit both students and colleges; but research shows that while it helps colleges, it serves as a detriment to students.

While inflation has been rising in the last 30 years, college tuition has far surpassed it. According to College Board, between the 1987/1988 and 2017/2018 school years, 4-year public institutions’ tuition rose 213% while 4-year private institutions’ rose 129%. Federal aid has also increased. College Board also found that between the 2006/2007 and 2016/2017 school years, federal grant aid rose by 102% while federal loans rose by 31% during the same period. Federal spending and college tuition have both risen, which brings up the question — is there a positive correlation between federal aid and college tuition?

When federal aid grows, it entices colleges to raise prices because they know that federal aid will cushion the blow for some students. Those who receive federal aid will not notice the growing tuition as much as those who receive little to no federal aid. Colleges continue to raise prices knowing that federal aid will continue to meet the growing demand. A study entitled “Does Federal Student Aid Raise Tuition?” from the National Bureau of Economic Research, done by Stephanie Riegg Cellini and Claudia Goldin, found that for-profit colleges that had access to federal aid were 75% more expensive than for-profit colleges that did not have access to federal aid. The study was conducted only on for-profit colleges, but with the available student loans, I believe that non-profit schools are also enticed to do the same. A different study entitled “Accounting for the Rise in College Tuition,” conducted by Grey Gordon and Aaron Hedlund, found that equilibrium tuition at colleges rose approximately 102% due to grants and loans alone between 1987 and 2010. They also include a clause within their findings, stating that without a proper way to measure how school competitiveness would affect the finding, the finding above is based on a non-competitive school. The authors suggest that school competitiveness would help stagnate rising costs associated with the increases in federal student aid. In addition to the increase in tuition, the study also found that default rates also went up (17%-32%).

This brings up the question: how does this affect UNC Charlotte? While UNC Charlotte has relatively lower tuition prices compared to some of its counterparts in the UNC system, to what extent is UNC Charlotte competitive? There are other universities located in and around Charlotte, but all are private. Considering that UNC Charlotte is the only public 4-year university in the Charlotte area, it attracts most students from the Charlotte area who wish to go to a local public university. Without any public university competition close to UNC Charlotte, and with the increasing and costly construction projects, UNC Charlotte and the state would see no problem with an increase in tuition rate, as needed. Another aspect of student loans, specifically the PLUS loan (which is an unlimited loan for parents of students), is that they would entice colleges to raise prices because they know that parents could fall back on PLUS loans, and the only requirement to obtain the loans is a credit based one that was implemented under the Obama administration.

The crisis of college tuition and student debt is not a problem with an easy solution and will require multiple steps and solutions to solve it, but we can start by decreasing federal aid and making it more competitive among students. With a decrease in aid, colleges will be forced either to regulate prices or lose students, the latter being something that colleges will strive to prevent, making the first option more viable.

The correlation between the cost of college and federal aid, both to students and colleges, implies that a curbing of federal aid to colleges would actually help the average student rather than hurt them. It could persuade parents and students not to take out loans that they may not be able to pay back in the case of PLUS loans. The relation between federal aid and college tuition is something that not only affects colleges but its students and potential students who view cost as an important factor when deciding to go to college. As college tuition continues to skyrocket, due in part to more federal aid as well as other factors, we as a society need to tackle the important issue. While decreasing federal aid will not solve the problem of student debt and rising costs entirely, it could be a good first step.

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