As a recent college graduate it is hard to ignore the constant increasing cost of higher education. Sure, I may not have to worry about those rising costs now but I have been left with the burden of student loans that I have to repay as I enter into this competitive job market. The question many in my generation are asking is “Why does the price of tuition keep rising?” but we are left with mixed answers that don’t really tell the whole story.

It seems that the trend in our society is that when something becomes available it begins as an expensive item only available to a select group of people and after a while it goes down in price and becomes available to a larger consumer base. Take the iPod for example, which sold for $399 initially. This required you to have the possible income and a Mac to use it with. Fast-forward to today the iPod Nano with more than three times the memory sells for $149 and it seems almost everyone has an iPod of some kind. The iPod is by no means the only product or service to experience this kind of increasing market presence. This kind of decreasing price is due to our market-based economy where competition and innovation is encouraged and eventually awards the consumer with a lower cost and widely available good.

If this kind of scenario happens with the iPod, cell phone, and personal computer…. Why hasn’t it happened with higher education? Sure there was a time when searching for a professional career that a degree was preferred but now having that diploma has become essential in today’s society. Much like the iPod has become the end all be all in mp3 players (now integrated in phones) so has a college degree when trying to enter the ever-competitive job market. One of the most straightforward answers would be to say increasing Federal aid. According to the College Board, Federal aid for students has increased 164% over the past decade (adjusted for inflation).

The average person may think that increasing Federal aid makes college more affordable and accessible, it actually does quite the opposite. This kind of thought was first brought to light by former Secretary of Education William Bennett. Bennett worked under President Reagan and shared the very same staunch avoidance of government spending. Bennett’s theory is essentially that subsidies in higher education are matched almost dollar for dollar in increases in the price of tuition. The savings from the subsidies are not passed on to the students but rather kept by the universities. Perverse incentives have caused these universities to keep increasing prices as more and more Federal aid is dispersed.

A 2010 study by the Goldwater Institute found that many universities have been increasing their administrations while even decreasing the amount of professors. This clearly shows that they are not concerned about passing on the saving to the students but rather to themselves. It is hard to deny the numbers; when enrollment rose between 1993 and 2007 by 14.5%, administrators employed per 100 students rose nearly 40% and spending on administration per student rose by 66%.

So it seems as though the policy to increase student aid is having unexpected outcomes and is actually increasing costs. We cannot really blame the universities if as a nation we keep giving out federal aid; this is really just free money for them. If policy makers took a look at how they were not solving a problem but rather exacerbating one that is going to eventually cripple the financial future of many young Americans we can actually truly take steps in bringing a more market based approach to higher education.