The Forgotten Story Of College Costs & Student Aid

It is no secret that college is costly and has grown increasingly more expensive over the past 4 decades. Graduate degrees, in particular, have more than tripled in price since 2000, far outpacing the cost of housing, food, or healthcare. As a result, 43 million Americans now owe more than $1.6 trillion in student debt, with recent federal policy restricting how much graduate students can borrow and how they repay. With the ever-increasing costs, it is no surprise that figures such as employment rates, ROI, and student debt have come to the forefront of public attention.

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One might naturally wonder, how did we get here?

The instinct is to blame universities’ “administrative bloat” for skyrocketing costs. While colleges had a role to play in the increasing cost, so too did the government and public. Since World War II, the federal government has intertwined itself with higher education by financing colleges to conduct research instrumental to national defense, both during WWII and the Cold War. In fact, the launch of Sputnik helped spawn the first federal student loan program. The G.I. bill was passed in part to curb the millions of soldiers from flooding the job market after WWII, and indirectly led to the massive surge in college enrollment because the government, for the first time, made college an option. During this time, college was seen as a government partner and a public investment worthy of taxpayer dollars.

Yet, in the 1980s, federal and state governments retreated from viewing higher education as a public good. President Reagan led a shift toward treating tuition as a private responsibility (in part to curb student protests at universities in California while he was Governor), cutting state subsidies for colleges and fueling reliance on loans.

While the government helped set the tone by allowing banks to enter into the student loan market, individual colleges had a role to play as well. While it is likely that less federal and state aid to colleges may have influenced tuition increases, there is also evidence that the availability of government-backed loans also led colleges to raise prices, also known as the Bennett hypothesis. Some of the early investors of Sallie Mae, the agency that financed banks with government money for student loans, were individual colleges such as Harvard, Yale, Princeton, MIT, Notre Dame, Stanford, and Brown.

Simply put, colleges invested money into this company and profited while simultaneously raising tuition because they knew students would have government-backed money to pay the increased tuition and fees.

Another aspect to consider is that we want more (and require more) from colleges today than we did historically. Colleges have evolved much since the foundation of the first U.S. college (Harvard) in 1636. Services that many students (and their parents) desire contribute to the addition of administrators: University-sponsored housing so students live with similarly aged classmates, mental health counseling services to help students heal, career centers for job guidance, extra-curricular clubs for leisure and skill development, athletic facilities for sports and physical fitness, the list goes on. Colleges also have to hire administrators to comply with certain laws to protect and support people with disabilities (ADA) or Women (Title IX). These programs and facilities are expensive to maintain and cannot be run by professors alone, adding to the "administrative bloat".

The result is a system where society has never resolved what higher education is for and who should pay for it. And now the stakes are higher: many industries (medicine, law, education, social work, therapy, etc.) require graduate credentials for entry, but federal grants largely stop at the bachelor's level. We ask individuals to fund not just one degree, but two, even as the workforce depends on their advanced training.

For executives, the takeaway is clear: if businesses require highly educated talent, they cannot ignore the financing crisis constraining them. Leaders should push beyond tuition reimbursement perks to build scalable pipelines and advocate for renewed public investment.

The history is plain: government policies and market incentives created the cost spiral. The solution must be just as collective—corporate, academic, and federal actors aligning to ensure advanced education strengthens both opportunity and the economy without saddling the next generation with unsustainable debt.

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