More federal financial aid available to students pushes colleges to raise their tuition.

Market Watch reports.

Has college financial aid totally backfired?

It’s pretty clear that college tuition has been going up over the past several decades, and there are many theories as to why. A new study offers more evidence to an already-heated debate.

Increased availability of financial aid accounted for 40% of the jump in tuition costs between 1987 and 2010, according to a working paper released this month by the National Bureau of Economic Research, a Cambridge, Mass.-based private, nonprofit economic research organization. When you add declines in student loan interest rates as well as expansions in grant aid, the increased access to federal aid accounts for more than half of the jump in tuition, said Aaron Hedlund, an economist at the University of Missouri and one of the authors of the study.


 
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