An editorial in the Valley Morning Star
(in the Rio Grande area of Texas) highlights the effect of giving higher student aid on tuition.
As long as the money keeps flowing, and parents and students are willing to shoulder increasing amounts of debt, no mechanism exists to force colleges to contain the costs they pass on to students.
Students probably are willing to take on the debt, out of inexperience and out of a time horizon that seems lengthy to your average 20-year-old. I read a report
on a paper (it's here
, but it has lots of statistics, so consider yourself warned) that about 30% of the price increase in tuition above the CPI inflation level is due to increases in financial aid. Quality adjustments probably account for an additional 15%. The remainder is unexplained, and interestingly the increase is stronger in their paper for comprehensive public universities (which are most likely those that are -- or at least were -- accessible to low-income families.) I've heard it often argued that the Hope scholarships are a middle class transfer policy, and the amount of evidence that is out there on this is rather substantial (for example, this paper