Higher education is a key driver of economic mobility in the United States. The ballooning cost of college, however, has placed a postsecondary degree increasingly out of reach—particularly for low- and middle-income students. Net prices for tuition, fees, room, and board (TFRB) have grown steadily at public four-year schools, rising 20% since the 2007-2008 academic year, after adjusting for inflation. These rising prices have contributed to soaring levels of student loan debt. Indeed, the size of the federal student loan portfolio has nearly tripled over the same time period, from $642 billion to $1.6 trillion in real terms.
Rising prices in higher education have several causes, but one clear driver is declining state investment in higher education. States used to bear principal responsibility for financing higher education, but state tax cuts, competing priorities, and the compounding impact of recessions on state finances have all eroded state support. Facing shortfalls, colleges and universities hiked tuition to fill the gap, leading students to lean on the federal student loan system to cover the increased cost of attendance.
Some tout free college as a solution to these challenges, but having taxpayers foot the bill for eliminating tuition would fail to adequately address the rising cost of college and continue to leave the system vulnerable to shortfalls during a recession. Rather than a one-size-fits-all model, a flexible matching grant that focuses on affordability and rewards a state’s commitment to higher education is a more sustainable approach. This framework would ensure durable investments in higher education that benefit students directly, while also preserving state discretion.
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