One of the foremost issues currently facing higher education in the United States is the rising cost of education. As a result, the Cornerstone University expanded on the nature of massive student loan debts due to rising costs which has an impact on college affordability (mainly for students from middle and working class families). A poll also conducted by the Pew Research Center showed that most young adults in America do not attend college due to financial challenges. Additionally, the Trends in College Pricing, using the Carnegie classification revealed that 2018/19 college costs at both public four-year and private nonprofit four-year institutions increased by 3.2% (largest in the public nonprofit sector).
Several issues including the value attached to college education by the labor market, long-lasting impact of the recession years, and reduction in state government subsidies, etc. account for the increase in college costs. Prevalent among these reasons is state government subsidies, because 20% percent of higher education funding is provided by the states. Reduction in subsidy to public institutions and lack of other forms of support other than student financial aid at private institutions may disproportionately affect institutions of higher education. Higher education institutions (mainly public) are caught between declining revenues, decline in enrollment, and increase in tuition. States subsidy is an important component of higher education budget and represents the means through which states are able to control and regulate costs of institutions. Increases are normally mitigated through subsidies from states. Hence, when subsidies decrease, cost of higher education mainly tuition which serves as the highest source of revenue for institutions increase and in turn affects access to higher education for low-income families, enrollment rates, and completion rates. Subsidy is one of the best means through which states can ensure that most of its initiatives are processed and facilitated at higher education institutions without same having huge financial burden on institutions. Therefore, state governments need to increase subsidies to institutions; as subsidies increase, costs will definitely decrease.