Why Have College Tuition Costs Changed So Much in the U.S.?

America has a long history with government funding that changed public expectations of college tuition and influenced its cost — for better or worse.

The Fascinating, 150-Year History of College Tuition in America

Links between higher education and American government go back more than 150 years. Believing that an educated populace benefits the nation, Congress passed a series of laws to fund public universities at low to no cost to students.

Today, college is seen by many as essential and, according to U.S. News & World Report, the cost of tuition for a four-year college ranges from $11,171 (in-state public) to $41,411 (private). Even though the government provides more than $150 billion in grants, loans and work-study money each year, according to the Lumina Foundation, one in six adults has student loan debt that averages more than $30,000.

What got us here exactly? Read on to learn about the fascinating history of how the cost of college tuition in America has drastically changed since the very first public university opened in the late 1700s.

1795: The Birth of Public Universities

The first public college, the University of North Carolina, opened in 1795. At the time, only about 2 percent of (mostly wealthy) young men attended college.

Since few careers required formal schooling, the benefit was merely prestige, and even though private philanthropy subsidized tuition costs, few could afford the loss of wages that attendance would require.

1830s: Manual Labor Colleges Become a Thing

In the 1830s, higher education opened to the working class at “manual labor colleges." These institutions, such as the pictured Oneida Institute, offered students the option to work at the school in exchange for an education.

A changing society eventually saw more than 200 new degree-granting institutions in the 19th century, but many struggled financially and ultimately closed.

1862: Morrill Act Provides Land for Federally Funded Universities

In 1862, the Morrill Act provided each state and territory with 30,000 acres of federal land per Congressional representative to establish a “land grant” university. This land could be used as a location for the school or sold to provide funds.

States without sufficient land within their borders received federal land in other states. The act required that these schools teach agriculture, mechanic arts, military tactics and classical studies to the working classes. With this federal subsidy, states were able to provide a public college education with little or no tuition.

1887: The Hatch Act Emphasizes the Growing Importance of Agriculture Schools

With the rise of commercial agriculture came the awareness that the U.S. needed to be globally competitive. The Hatch Act of 1887 provided federal funds for states to establish “agriculture experimental stations.” These stations were most often affiliated with the land-grant state schools and provided the ability to conduct a broad range of research in all aspects of agriculture, both local and national, while subsidizing a public education.

In 2019, more than $63.8 million was appropriated for related programs at 58 colleges and universities. In 2020, 59 schools received appropriations totaling more than $195 million.

1890: The Birth of Historically Black Colleges and Universities

In 1890, the Second Morrill Act reauthorized annual appropriations for the land-grant college with a stipulation: States that made admissions decisions based on race would not be eligible for these funds. But the act offered a workaround: States could open a separate land-grant university for Black students.

Nineteen of the new schools established under this act are today known as Historically Black Colleges and Universities (HBCUs). Like the other land grant universities, these operated with low or no tuition; tuition at private East Coast colleges at the end of the century was about $120 to $150 a year.

1914: Government and Universities Partner for Research

The Smith-Lever Act of 1914 established a system of cooperative extension services to provide not only research, but also education services through land-grant universities. This partnership between the U.S. Department of Agriculture and colleges brought new agricultural practices and advanced technology directly to rural areas, with the goal to improve American agricultural productivity.

The act also resulted in the nationalization of the national 4-H program, which is still supported by the cooperative extension program. In 2020, Congress appropriated $70 million to 76 colleges and universities through the program.

1916: Educating Both Civilians and Soldiers

The National Defense Act of 1916 authorized an Army Reserved Officer Training Corps (ROTC) on college campuses nationwide. This program made a two-year basic course of study mandatory at land-grant universities (though not universally enforced) and voluntary elsewhere.

This allowed men to attend college at no cost while simultaneously preparing to serve their country. The outbreak of World War I paused the program as designed, and changes (including a Junior ROTC Program) were introduced in the National Defense Act of 1920.

1918: War Department Introduces the Student Army Training Corp

When the United States entered World War I in 1917, there was a significant drop in college enrollment. At the same time, the Army had a shortage of officers and men trained in specific trades.

To combat this, in the summer of 1918, the War Department announced the Student Army Training Corp., which gave young men the opportunity to attend college for free and to earn additional officer’s training in exchange for entering military service. The program dramatically increased college enrollment; more than 100,000 enlisted the first day.

1920s and ’30s: College Enrollment Increases Five-Fold

The 1920s brought a focus on youth and an increased desire to attend college, though sometimes more for social than academic reasons. College enrollment went from 250,000 to 1.3 million from 1920 to 1944. College sports increased in importance, and women began attending college in greater numbers.

Higher education was increasingly seen as a path to social and economic growth, and the idea of a junior (two-year) college gained in popularity. From 1920 to 1940, the average cost of private college tuition nearly doubled ($70 to $133) while public schools remained free or low cost.

1935: Bankhead-Jones Act Provides More Federal Funding

The Bankhead-Jones Act of 1935 provided additional federal funding to land grant colleges. Under the plan, the Department of Agriculture received 40 percent of the proceeds of the sale and leasing of public lands, and the other 60 percent was allocated to the states proportionate to the rural population of each.

Unlike the Hatch Act, only states that matched funds were eligible for federal contributions. The act authorized $1 million in its first year, rising to $5 million for the fifth year and beyond. Today, $8.1 million a year is divided equally between all states, with another $4.36 divided based on population.

1935-1943: National Youth Administration

The National Youth Administration was a “work study” program that operated from 1935 to 1943. Part of the Works Progress Administration, it was formed through executive order by Franklin D. Roosevelt to prevent students from dropping out of school and to provide work experience and training in a variety of fields that would benefit the nation.

The program provided nearly $600,000 in scholarships to college students who received $306 to $400 a month to pay for college expenses.

1940s: Contributing to the War Effort

College enrollment dropped as the U.S. entered the Second World War but not as sharply as it had during World War I. Still, college administrators had to cut costs or get creative to cover costs without raising tuition.

Some added programs of military interest, such as Colgate University’s federally funded Navy Flight Preparatory School and Navy Reserve programs. Again, recognizing that the military needed specific skills, Congress responded by providing new continuing grants to public colleges and universities for research and development, thereby subsidizing college costs for all students.

1944: G.I. Bill Helps Returning Soldiers

The Servicemen's Readjustment Act, popularly known as the "G.I. Bill,” was signed into law in 1944, shortly before the end of World War II. It was designed to assist returning servicemen to re-adjust to civilian life and provided, among other benefits, funds for college tuition.

More than 2 million veterans attended college within the next seven years, and the number of bachelor’s degrees awarded more than doubled. The bill had spent a total of $14.5 billion in education and training programs when it expired in 1956.

1946: President Truman Looks Into Expanding Higher Ed Opportunities

In 1946, President Truman created a commission to look into higher education and to examine ways to expand opportunities for “all able young peoples.” The six-volume report recommended an influx of federal funds to public institutions to help them expand and improve their programs.

It also recommended a program to provide federal funds to low-income students to allow them to attend the school of their choice and to extend free public education through the first two years of college. While the report was not a directive, it influenced the direction college funding would take in the future.

1950: National Science Foundation Created

In his 1945 report, “Science, The Endless Frontier,” Vannevar Bush proposed that the federal government establish an agency to “promote a national policy for scientific research and scientific education” and “develop scientific talent in American youth by means of scholarships and fellowships.”

Over the next five years, Congress and the administration worked out the details, and in 1950, the National Science Foundation was created. The agency started awarding merit-based fellowships to students in 1952. Federal funding for the foundation has varied over the years, but today, the foundation provides about a quarter of federal funding for academic scientific research.

1955: National Merit Scholarship Corporation Formed

National Merit Scholarship Corporation President

The National Merit Scholarship Corporation formed in 1955 amid Cold War concerns that the U.S. was behind other nations (particularly the Soviet Union) in science. A non-profit organization, it holds an annual competition, the National Merit Scholarship Program, which awards scholarship funds based on test scores.

In its first year, 555 students received scholarships; in 2015, that number was up to 7,500. The organization added the National Achievement Scholarship Program to identify academically talented Black youth in 1964. This program transitioned to the United Negro College Fund in 2015. More than 34,000 students have benefitted from Achievement Scholarship awards.

1958: The Race to Space (and STEM Education)

The 1957 Soviet launch of Sputnik prompted an international technology competition that put new emphasis on federally funded scientific research and education, including graduate fellowships to encourage students to pursue careers in STEM fields.

In 1958, the National Defense Education Act established the National Defense Student Loan (NDSL) program to provide low-interest loans to college students. Students who chose to go into the teaching field could have their debt canceled. The act is credited with making college possible for millions of students. Enrollment more than doubled from 3.6 million in 1960 to 7.5 million in 1970. It also marked a new way of looking at college funding.

1964: Subsidized Work Study

Designed to combat economic inequality, the primary purpose of the Economic Opportunity Act of 1964 was to establish a job corps and literacy program for older learners. It also formalized the federal work study program.

Originally called the College Work-Study Program, the new work-study program provided grants to colleges and universities for the purpose of creating part-time jobs for lower-income students to earn money toward their education. Students hired under the program were required to maintain grades and full-time status. More than $412 million was allocated per year, through 1966.

1965: Higher Education Act Helps With Student Loans

The Higher Education Act of 1965 provided $70 billion for educational opportunity grants to help pay for undergraduate studies through June of 1969. It also extended the College Work-Study Program and established a federally insured guaranteed student loan program.

This not only made it easier for student borrowers to obtain a loan, but it also provided some financial relief to these students by committing the U.S. government to pay a portion of the interest of qualified loans through 1972 and to cover any remaining loan if a student defaulted. College enrollment almost doubled over the next decade.

1972: Beginning of the Pell Grants Program

The 1972 Education Amendments extended the Higher Education Act of 1965 and broadened eligibility to students attending community colleges and career and trade schools as well as part-time programs.

Congress also established the Basic Educational Opportunities Grants (BEOG) program which, for the first time, allocated federal funds directly to eligible students, setting aside $122.2 million for the 1973-74 academic year. Renamed the Pell Grants program in 1980, the program is administered by the Department of Education. The 2020 cost of the program was $30.9 billion.

1970s: Federal and State Funding Starts to Fade

The 1970s saw the end of the Vietnam War, the oil embargo and an increased focus on women’s rights. The percentage of women in college spiked, from 41.2 percent in 1970 to 51.4 in 1980, while total college enrollment in the same time jumped from 8.5 million to 12 million.

This reduced the per-student federal subsidies provided directly to colleges, and the perception that college students caused discord led politicians to reduce state funding. Double-digit inflation meant everything cost more, but starting in 1975, tuition increased at an even higher rate: 5 to 6 percent above inflation (compared to the 2 to 3 percent of prior years).

1978: Rising Inflation and Interest Rates Make Loans Necessary

The 1978 Middle Income Student Assistance Act (MISSA) opened subsidized guaranteed loans to students in all income brackets. A year later, Congress slipped in an amendment that tied subsidies to changes in Treasury bill rates. Rising inflation and interest rates soon made loans necessary for many students to afford college.

MISSA further established that loans could be considered part of a student’s financial aid package; this soon became the norm. It also stated that the program should consider the educational expenses of other dependent children in a family to ease the burden for families sending multiple children to college at the same time.

1980s: A Growing Focus on Loans

The 1980 amendments reauthorized federal programs and renamed the BEOG program the Pell Grant Program. It also created the Parent Loan for Undergraduate Students (PLUS) program, allowing middle-income families to borrow up to $3,000 each year, regardless of income. The following year, the 1981 Omnibus Reconciliation Act repealed MISSSA and allowed graduate and independent undergraduates to qualify for loans.

It also established origination fees of 5 percent on new loans and introduced a needs-based test to qualify for interest subsidies. The Higher Education Amendments of 1985 renamed the federal loan program the Guaranteed Student Loan Program.

1980s: Colleges Begin to See More Applicants

Even though the shrinking population of 18- to 24-year-olds (from 21 million in 1980 to 19 million in 1990) led the Educational Testing Service to predict a drop in college attendance starting in 1980, the opposite occurred.

The percentage of those entering college grew from 22.3 percent to 28.6 percent. This number has continued to rise each year. With the demand for spots in college classes increasing, institutions could not only be more selective about which students they selected, they could also charge more — a simple case of supply and demand.

1985: Tuition Increases More Than Inflation

The 1980s recession resulted in reduced federal and state aid to public institutions. By 1985, federal spending was cut by $594 million, plus $338 million in Pell grants, forcing students to take out more loans. Legislators talked about the danger of overreliance on loans, but no new funding was forthcoming, as tuition rates grew at a rate well beyond standard inflation.

As the number of loans rose, Congress passed laws intended to reduce defaults and trim costs, for example, prohibiting students who had defaulted on previous loans from getting new ones.

1992: Congress Adds to the Loan Pool

The 1992 Congress set out to provide more balance in the number of grants and loans offered to students but could not work out an agreement to ensure that Pell Grant increases would match that of inflation. The compromise was to add funds available to borrow.

They removed PLUS loan limits and created a new unsubsidized Stafford loan that would be available to all students, regardless of need. The Higher Education Amendments of 1992 also established a single formula for determining all federal student aid. While the intent of this law was to make college more affordable, state and local funding decreased, and college loan debt increased dramatically.

1997: Tax Changes Impact College Affordability

In 1954, the Internal Revenue Service had determined that all scholarships would be tax free. This changed in 1980 when funds from teaching or research services became taxable, and in 1986, scholarship funds for living and travel expenses became taxable.

Some relief came with the 1997 Tax Payer Relief Act, which established the HOPE Scholarship Tax Credit and Lifetime Learning Tax Credits. The act also made student loan interest deductible and encouraged parents to save for their children’s education by allowing them to open educational IRAs for their children.

2007: Updates to Pell Grant Help All Eligible Students

The College Cost Reduction and Access Act of 2007 (CCRA) provided annual increases to the maximum Pell Grant amount, from $4,310 for the 2007-08 year to $5,400 for 2012-13. It removed a sliding scale method of awarding money, making the grants uniform for all eligible students, so those attending a less expensive school would receive the same amount as those attending more expensive schools.

It also cut interest rates for Stafford college loans and established an income-based repayment plan for low-income borrowers. Of note was the new possibility to have some debt canceled by working in public service jobs.=

2010: Student Loan Debt Outpaces Credit Card Debt

The recession of 2008 forced more people to borrow money to fund their college education, and in 2010, the total national student loan debt topped the nation’s credit card debt for the first time, with an average student loan totaling $25,000.

President Obama signed The Student Aid and Fiscal Responsibility Act into law as part of the 2010 Health Care and Education Reconciliation Act. The maximum Pell Grant increased to $5,550 for the 2010-2011 school year, with a regular annual increase established to offset inflation. To save on administration costs, Congress eliminated subsidized private loans; moving forward, all new loans would be directly through the government.

2017: Tuition Surpasses Government Subsidies

According to the State Higher Education Executive Officers Association, in 2017, “For the first time, more than half of all states relied more heavily on tuition than on educational appropriations.”

While state funding accounted for the largest amount of outside financial support to public colleges in 2017 (at an all-time high of $673 per full-time student), it wasn’t enough to cover rising tuition costs. While a 1975 Pell Grant covered almost 80 percent of college costs, by 2017, the maximum grant of $5,920 covered less than a quarter of the average cost of $23,835.

Today: A Movement to Make College Free

In recent years, there has been debate about government-funded college education on par with countries in Europe — and it’s not as unachievable as it sounds. History shows that the State University of New York (SUNY) system was tuition free until 1963; University of California didn’t charge tuition until the 1980s, and free community college programs exist in 25 states.

And since the 2009-10 academic year, “first-time, full-time students at public two-year colleges have been receiving enough grant aid to cover their tuition and fees,” according to the College Board. Plus, a number of “elite” institutions have pledged to graduate low-income students debt-free.

But only time will tell to see if history can be changed.