Ringo Starr, the Beatles’ drummer, once said, “Everything government touches turns to crap” — a gross generalization, for sure, but nevertheless true in many cases.  For example, health care and education are two U.S. systems that show a correlation between government intervention and cost increases, with not much to show for them in quality.

The escalating cost of college tuition in the United States has become a pressing issue, with inflation-adjusted tuition at public four-year colleges rising over 180% from 1980 to 2020, according to a recent report from the Georgetown University Center on Education and the Workforce.  A significant factor in this trend is the U.S. government’s involvement in college loans, which has expanded access to higher education but also contributed to tuition inflation.  Though not the sole driver, federal loan programs have created an environment that fuels rising costs.  This is supported by empirical evidence, though counterarguments highlight other contributing factors.

Federal initiatives like the Higher Education Act of 1965 have increased access to college through programs such as Pell Grants.  Since students can access readily available loans to cover costs, colleges face less pressure to keep tuition affordable.  This dynamic aligns with the Bennett Hypothesis, proposed by William Bennett in 1987, which suggests that increased federal aid allows colleges to raise tuition by capturing additional funds.  A 2015 study from the Federal Reserve Bank of New York supports this, finding that for every dollar of subsidized loan aid, tuition increases by about 60 cents.

The influx of loan money has also enabled colleges to increase spending on non-instructional areas, such as administration, facilities, and amenities.  Data from the National Center for Education Statistics reveals that administrative staff at colleges grew 60% faster than instructional staff from 1993 to 2013, contributing to higher operational costs passed on to students.  The report stated, “The number of district administrators in U.S. public schools has grown 87.6 percent between 2000 and 2019 compared to student growth at 7.6 percent and teacher growth at 8.7 percent.”  For clearer explanations of these data, click here, here, and here.  This phenomenon, sometimes termed “administrative bloat,” reflects how institutions leverage loan availability to fund expansions without immediate financial pushback, as students can borrow to meet rising costs.

Market dynamics worsen the issue.  Colleges, particularly selective ones, operate in a market with inelastic demand, where students are willing to pay premiums for prestige or credentials.  Easy access to loans facilitates this, allowing schools to charge more without losing enrollment.  By 2023, total student loan debt reached $1.7 trillion across 45 million borrowers, as per Federal Reserve data.

However, some argue that external factors affect tuition increases more than federal loans.  For instance, state funding for public two- and four-year colleges in the 2017 school year was nearly $9 billion below its 2008 level, after adjusting for inflation.  This forced institutions to rely on tuition revenue.  Another contention is that students are demanding improved facilities and services and that this is what causes rising costs, not just loan availability.  However, this does not negate the loan-tuition link, which creates a feedback loop — higher tuition leads to more borrowing, enabling further tuition hikes.

The consequences of this cycle are evident in student debt burdens.  As of January 2025, the average federal student loan debt per borrower is approximately $38,883, while combined federal and private loan debt for 2022–2023 graduates averages $29,300.  Debt varies by degree type, with public four-year college graduates owing $27,100 on average; associate’s degree holders from public institutions owing $14,890; and graduate students, particularly in medical fields like dentistry, facing debts as high as $296,500.  Associate’s degree holders may repay loans in 3–5 years, whereas graduate degree holders, especially in high-debt fields, may take up to 30 years.  Demographic disparities also persist, with black borrowers and women facing longer repayment periods due to higher debt and income gaps.

Student loan debt in America has risen more than 361% since 2004.  This is mostly due to the increasing cost of tuition.  In fact, since the 2004–05 school year, average tuition and fees increased 17% for a public two-year school, 36% for a public four-year school and 30% for a private nonprofit four-year school.

In conclusion, although state funding cuts and institutional spending contribute to rising tuition, federal loan programs significantly exacerbate the issue by increasing demand and enabling colleges to raise prices.  The resulting $1.7-trillion debt crisis and extended repayment timelines emphasize the need for reform.  Addressing tuition inflation requires tackling both loan policies and broader funding models to ensure higher education remains accessible and affordable.  The question of whether or not a four-year college degree is even worth the cost for the average student these days is worthy of a separate essay.

Ringo called it.

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