The myth persists. Contrary to the popular idea that federal student loans have been a consequence of rising college tuition prices, which have increased by twice the rate of inflation over the past three decades, the very opposite is true. Federal loans are, at least in part, a cause of such tuition hikes. As The Center for College Affordability and Productivity states, increases in federal student aid since it’s inception in the 1970s have allowed colleges and universities to raise their tuition, confident that federal loan subsidies would help cushion the increase. As a result, annual federal student loan volume has increased tenfold — measured in inflation-adjusted dollars — every year since.
Want tangible proof? Tuition at the University of California -Berkeley used to be about $700 a year in the 1970s. Now, it’s $15,000 per year; that’s a 2,000 percent increase. All the while, student dependency on federal loans now encompasses two-thirds of the entire student body there.
Thomas Sowell, a professor of economics at Stanford University, explains the process like this: If College X can charge $7,000 per student and cover its costs and the average American family can afford $8,000 for tuition, then College X has two options. It can set tuition at $7,000, receiving its basic operating cost, or it can set tuition at $11,000, thus extracting an additional $1,000 from the family and an extra $3,000 in the form of federal student aid that is assured to be provided.
So let the myth persist no longer. Increasing interest rates on federal student loans will rein in the irresponsible practices of tuition increases our universities have engaged in for years. This complex can no longer be fed by the ubiquity of federal student loans.
— Steven Vanderflip, second-year political science and English student