Rising Tuition

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EH 102
11 March 2013
College Tuition: Why is the Tuition Continuously Rising?
Most people have heard an elder complain about rising prices saying, “When I was your age I could go to the store with a quarter and buy a bag of chips, a few pieces of candy, some cookies, a drink and still have change left over.” Although the prices from decades ago are ideal, the concept of inflation and the decrease in the value of money have been accepted. Inflation affects the price of everything like milk, clothing, medical care, gas, and especially college tuition. According to the Bureau of Labor and Statistics, college tuition prices have increased at the highest rate compared to any consumer item, medical care, or even gas. In fact, college tuition and fees, as of 2012, are 600% of the tuition and fees in 1985 (Rampell 4). This statistic poses the question of why the cost to obtain higher education is steadily rising. A simple explanation can be found in the key economic principle that demand drives prices up, but the issue goes much deeper than that. The structure of the financial aid system, additional accommodations offered by colleges, and most of all the decrease in government funding toward higher education are the causes directly correlated to the continuous rise in tuition.

Firstly, the structure of the financial aid system is a contributing factor to the steady increase in college tuition. Dr. Joshua Robinson, an economics professor at the University of Alabama at Birmingham, explained that it is often argued that the increase in federal aid simply leads colleges to raise their tuition costs to reflect the financial aid in hopes that it will buffer the increase. This idea represents the Bennett Hypothesis, which was created by U.S. Secretary of Education, William J. Bennett (Robinson). There is much argument over this hypothesis, but there have been many credible findings that support this idea. Title IV deals with the federal student aid programs. According to an article by Judith Scott-Clayton, similar programs offered by non-Title IV “cost about 75 percent more when offered at Title IV institutions – with the difference in tuition roughly approximating the size of a Pell Grant (Scott-Clayton 8).” In addition, the amount of financial aid given out to undergraduate students on a national level has sharply increased over eight billion dollars since 2007, which means that more students are attending college and needing financial aid (Schworm 3). Referring back to the same information from the Bureau of Labor Statistics, it is especially interesting to note that from the year 2007, when financial aid increased, to present day the percentage increase in college tuition became exponentially higher than the rest of the increasing percentages (Rampell 4). This proves that the federal aid system has a significant connection to the increasing tuition rates. Another way that the structure of the financial aid system contributes to the rise in tuition is through the scholarships that colleges give out. In the academic article entitled “Why Tuition Costs are Rising So Quickly,” Robert Martin explains how the scholarships that colleges offer are a factor in the rising tuition crisis. He shares that when colleges offer scholarships they are really price discounts, so “the education and general expenses are overstated by the amount equal to scholarships.” Martin also shares that for colleges to ensure that their funds balance out, they “record tuition revenue as if every student paid the posted price for tuition (Martin 93).” In other words, the amount of revenue that a college lacks once all tuition is paid is equal to the amount in scholarships given. As a result, the tuition goes up for the non- scholarship students as a whole to make up for the amount dispersed in scholarships. With this occurring at colleges all across the nation it is clear to see how financial aid is a causal factor in the increase in tuition. The rise in...
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