Impact of Student Financial Aid, Labor Costs, and Government Appropriations on College Tuition from 2012-13 to 2021-22

Abstract

Using institutional-level panel data from 2012-13 to 2021-22 from the Integrated Postsecondary Education Data System (IPEDS), this study re-examines the impact of demand-side factors such as students’ financial aid and supply-side factors such as labor costs and government appropriations on college tuition for public four-year and private four-year non-profit institutions. It extends prior research on this topic by using data from more recent years and includes additional factors that may impact tuition. The results reveal that an increase in the average institutional grant will increase tuition for public and private nonprofit institutions. For instance, a $1000 increase in average institutional grant drives up tuition by 593 dollars for private institutions, 302 dollars (out-of-state) and 104 dollars (in-state) for public institutions. However, an average Pell Grant increase, which is a demand side factor, has a negative effect on tuition, contradicting prior literature’s finding that the increase in Pell Grant drives the tuition increase. This study did not find a large effect on tuition for other types of individual subsidies, labor costs, and state appropriations.