Little proof that federal aid raises college prices

May 24, 2013

Pages from Heller-MonographDonald E. Heller, dean of the College of Education at Michigan State University, argues there is scant evidence of a relationship between changes in federal student aid and tuition increases.

In a new monograph, Does Federal Financial Aid Drive Up College Prices?, he examines research on the so-called Bennett Hypothesis, which suggests that the availability of federal student loans provides “cover” for institutions to raise tuition, because students can offset any price increase with these loans.

The Bennett Hypothesis has been “misremembered” as linking all federal aid—grants as well as loans—to tuition increases, writes Heller.

The monograph, which includes an overview of federal financial programs, tuition trends and related economic theory, was written for the American Council on Education (ACE). Read the full report.