Congress May Address Soaring College Costs

Published March 1, 2004

Amid concerns about the soaring cost of college, Congress this year is expected to reauthorize the Higher Education Act of 1965 (HEA), which provides guaranteed loans, grants, and support services to college students and their families. More than half of full-time undergraduates attending four-year colleges and universities receive aid under one of those programs, with a higher percentage for those attending private institutions. While participation is higher among students from low-income families, a quarter of undergraduates from families with incomes of more than $100,000 received financial aid.

Rep. Howard “Buck” McKeon (R-California) has introduced H.B. 3311, the Affordability in Higher Education Act, which seeks to address the rising cost of tuition. The bill would establish a tuition cost index to track the rate of growth of tuition and would require institutions to submit information regarding their costs. Starting in 2011, if a school had raised its tuition at a rate significantly higher than the growth in the tuition cost index, the federal government would be authorized to stop direct subsidies to that institution.

The House of Representatives is expected to act on this and other provisions of the HEA in 2004. The Senate Health, Education, Labor and Pensions Committee has held hearings but has not held a mark-up.

The House of Representatives has voted on several parts of the HEA, including those that address teacher education and graduate and international studies programs.

Although research findings are inconclusive, there are indications federal loans and tax credits designed to make college more affordable have contributed to the rise of tuition. Tuition and fees at public and private four-year institutions have risen 38 percent in the past 10 years. In the past 22 years, the cost of a public four-year college education has increased by 202 percent.

“Over the past three decades the federal government has poured three-quarters of a trillion dollars into financial aid for college students. So why is college getting less–not more–affordable?” asks Forbes writer Ira Carnahan. “One answer seems to be that all those federal dollars have given colleges more room to jack up tuition. … The more cash the government pumps into parents’ pockets, the more the schools siphon from them.”

In 2003, the federal government made $59 billion available to students in the form of loans and grants:

  • $12 billion for voucher-like Pell Grants and Supplemental Educational Opportunity Grants to poor students;
  • $1.2 billion in employment subsidies (work-study);
  • $1.2 billion in Perkins Loans for low-income students;
  • $170 million to state matching grants;
  • $1 million for “loan forgiveness” for child care workers;
  • $31 billion in guaranteed loans (the Federal Family Education Loan Program, or FFEL); and,
  • $12 billion in loans in the federal government’s Direct Loan program.

In 2003, HEA also provided fellowships, academic scholarships, grants to universities for teacher education and other area studies, as well as funds to institutions serving large numbers of minority students.

HEA is not the only source of government funding for higher education. Higher education institutions receive billions of federal dollars for research and contract work. Additionally, federal Hope tax credits provide about $6 billion to mostly middle- and upper-income students.

Since 1965, the guaranteed loan program has grown exponentially. In four decades, the government has guaranteed loans of more than $485 billion. Federal aid program participation increased after the 1992 reauthorization enabled more middle- and high-income students to receive subsidized and unsubsidized loans.

“Unsubsidized loans” is something of a misnomer, since all guaranteed loans are subsidized to one degree or another. Taxpayers pay the interest on “subsidized loans,” and they pay subsidies to banks on all federal loans to keep the interest rates below the market rate and administration costs.

Krista Kafer is senior policy analyst for education at The Heritage Foundation. Her email address is [email protected].

For more information …

Additional information about the rise of college tuition is available in a report titled “The College Cost Crisis” by John Boehner (R-Ohio), chairman of the Committee on Education and the Workforce, and Howard P. “Buck” McKeon (R-California), chairman of the 21st Century Competitiveness Subcommittee. The report is available online at