BLOOMINGTON, Ind. – The latest research in the never-ending debate about skyrocketing college tuition costs suggests federal student loans could be the underlying problem.

“Student aid accounts for most of the tuition increases between 1987 and 2010, according to a working paper from the National Bureau of Economic Research,” Inside Higher Ed reports. “The more money students can borrow, the idea goes, the more colleges can charge.”

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The study, conducted by professors at Indiana University and the University of Missouri, points to the increased availability of subsidized and unsubsidized loan programs that don’t offset tuition increases. Colleges charge more, because financial aid bridges the gap, according to the news site.

“You’ve got to somehow tie aid to lowered tuition if you want to give money to students,” Grey Gordon, co-author of the working paper told Inside Higher Ed. “You have to somehow structure it so college can’t just increase tuition and capture that money.”

Gordon’s research backs what some call the “Bennett Hypothesis,” named after former Secretary of Education William Bennett, who wrote in a 1987 New York Times editorial that “increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions,” the American Enterprise Institute reports.

AEI quotes from the recent research “Accounting for the Rise in College Tuition”:

With all factors present, net tuition increases from $6,100 to $12,559 [and] the demand shocks — which consist mostly of changes in financial aid — account for the lion’s share of the higher tuition. … These results accord strongly with the Bennett hypothesis, which asserts that colleges respond to expansions of financial aid by increasing tuition. In fact, the tuition response completely crowds out any additional enrollment that the financial aid expansion would otherwise induce, resulting instead in an enrollment decline from 33% to 27% in the new equilibrium with only demand shocks. Furthermore, the students who do enroll take out $6,876 in loans compared to $4,663 in the initial steady state. The college, in turn, uses these funds to finance an increase of investment expenditures from $21,550 to $27,338 and to enhance the quality of the student body. In particular, the average ability of graduates increases by 4 percentage points. Lastly, the model predicts that demand shocks in isolation generate a surge in the default rate from 17% to 32%. Essentially, demand shocks lead to higher college costs and more debt, and in the absence of higher labor market returns, more loan default inevitably occurs. …

To grasp the magnitude of the change in borrowing capacity, first note that real aggregate borrowing limits increased by 56% between 1987 and 2010, from $26,200 to $40,800 in 2010 dollars. Second, the re-authorization of the Higher Education Act in 1992 introduced a major change along the extensive margin by establishing an unsubsidized loan program. We also find that increased grant aid contributes 17% to the rise in tuition, which mirrors the 18% impact of the higher college earnings premium. Our model also suggests that financial aid increases tuition at the bottom of the tuition distribution more so than it does at the top. These results give credence to the Bennett hypothesis.

Gordon’s research is based on a hypothetical college using data from private and public nonprofit institutions, which some believe makes it unreliable.

“This is an atom bomb mathematical technique on a problem that requires much more nuance,” College of William & Mary economics professor David Feldman said.

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And while the new research seems compelling, Feldman and others seem adamant that increasing student aid is the solution to fixing runaway college costs. Feldman, for one, argues colleges set tuition based on its wealthiest students who don’t use loans, and suggested the Bennett Hypothesis is much more applicable to for-profit schools than nonprofits.

Howard Bunsis, accounting professor at Eastern Michigan University, was also critical of Gordon’s conclusions.

“I go to college campuses almost every week and look at their expenses,” Bunsis told Inside Higher Ed. “It’s not student aid that’s getting a bigger share of the pie. In most places, it’s the administration.”