A new study from the Federal Reserve Bank of New York found that American colleges increase tuition and fees to get more available money from federal grants, reported Forbes.
On average, the annual cost of tuition, fees, and room and board is $11,052 at a public two-year school, and $18,943 for a four-year school, if the student lives in-state. Out-of-state cost is $32,762 annually. Private non-profit tuition is much higher at $42,419 a year.
Researchers with the New York Federal Reserve found a direct connection between these inflated tuition costs and available federal aid. They found that “institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around . . . policy changes, with a sizable pass-through on tuition of about 65 percent.”
Simply put, for every extra dollar of increased aid, colleges increased their tuition and fees by 65 cents. Forbes noted that “the government has unintentionally been involved in a tuition arms race.” When the government would raise its available aid to help lower-income students, the colleges responded by raising tuition and fees to “soak up” that extra federal money.
Students who aren’t eligible for federal grants, but can’t afford college outright, are put at a severe disadvantage as they are mostly indebted by student loans, $1.2 trillion.
Although these colleges are non-profit, they’ve still manipulated ways to receive free money from the government. It’s no different than senseless tax breaks given to corporations.