New study shows financial aid cause for rising tuition costs

Astudy by the National Bureau of Economic Research suggests that federal government aid to students is the reason for increasing college prices.

With over 8,000 Sonoma State University undergraduates receiving financial aid, this study proposes a reason as to why tuition and other college fees have increased over the years past.

The recent study, conducted by Grey Gordon and Aaron Hedlund of the bureau, explains how federal financial aid is the cause for increases in college tuition.

They are suggesting that because of the expansion in financial aid availability, colleges are increasing their tuition based of the assumption financial aid will still cover the additional costs.

Over the past few years, there has been an increase in both subsidized and unsubsidized loans available for students.

For subsidized loans, the federal government pays the interest of the loan while the student is enrolled in school, if they’re taking at least six credits.
Subsidized loans are not based on financial need and the responsibility is left to the owner to pay the money back.  

“When I think of financial aid, I think of loans that are given based on financial status,” said Steven Johnson, a sophomore history major. “I thought that was how most loans worked in terms of college students.”

The study states that from 1987 to 2010, tuition has experienced a 106 percent increase.
In the 2010-2011 academic school year, the annual cost of tuition and fees a Sonoma State undergraduate would have to pay was $5,290. In 2012-2013, this number rose to $6,862 and currently, an academic year for a student of Sonoma State University costs $7,330, according to the university website.

“I think it is just set in people’s minds that when you think of college, you think of a lot of money that needs to be spent in order to get a good education,” said Madison Muro, a sophomore art major. “I have never heard of financial aid being an explanation to college costing more, but it does kind of make sense.”

Economic professor Dave Feldman, author of “Why Does College Cost So Much?”, is one of the few economists who found flaws in the study’s findings.

Feldman has said that a college’s prices are set by its wealthiest students not by federal aid.
He has pointed out the study is based on information from a hypothetical college that was made from data given from private, as well as public universities, which are very different in terms of price and financial aid.

“Private universities price is based on a business model, where willingness and ability to pay definitely dictates the highest tuitions paid by some students,” said Professor Robert Eyler, interim dean at Sonoma State University and professor of economics. “At Sonoma State, a public university, tuition is relatively low versus the competition and generally reacts to changes in costs rather than a change in the ability of students to pay.”

While financial aid may be the cause for increasing tuition, the study does point out that faculty salaries are not the reason.

The theory of rising prices due to faculty salaries increasing has been around for some time, but the college model made in the study says that an increase in enrollment is the reason for an increase in faculty expecting higher salaries.

“The cost is not a per-student cost,” Gordon added in an article titled “Why is Tuition so High?” written by Ellen Wexler. “It has not become more costly to educate an additional student. It’s become more costly to educate all students in general.”
Some Sonoma State faculty are threatening to go on strike in the coming months due to disputes in their current salaries.

“As the son of two teachers I may be biased, “said Sean Mantooth, a senior psychology major,

"But I do think teachers should get paid more, absolutely.”
As word spreads of a possible new explanation as to what is and is not causing rising college prices, more economists will give their take on the study’s data.