Between 1955 and 1972 college tuition remained relatively affordable for middle-income families, but scholarship aid — whether from colleges, state governments or federal programs — was limited. When colleges offered financial aid it usually came in the form of small loans and work-study options. California was exemplary in that state citizens paid no tuition at in-state public institutions. Other states had merit scholarships for a small number of outstanding academic students. At the same time, in some low tax states, public college tuition was about the same as that at private colleges.
Only about a third of high school graduates went on to postsecondary education. Around 1965 a typical private college charged about $1,500 for tuition (roughly $14,244 in 2022 dollars). But there were exceptions. Rice University, for example, charged no tuition even though its student body came predominantly from prosperous families. Berea College in Kentucky used a zero tuition policy, which remains in place, to attract regional students from modest income families.
In 1972, changes in federal student financial aid completely changed everything. A bipartisan majority in Congress enacted new programs aimed at making college a viable option for more students from low-income families. The Basic Educational Opportunity Grant Program (later, renamed Pell Grants) was the largest initiative. It relied on need-based grants to partially cover tuition and living expenses. Legislators also aimed to entice more banks to participate in the Guaranteed Student Loan (GSL) program established in 1965, which had remained relatively small in scale due their hesitance to take part.
The programs revolutionized how both applicants and colleges approached admissions and affordability because they treated students as consumers. Congress hoped to give prospective students from underserved constituencies the leverage and resources — plus adequate academic advising and help with filling out forms — to consider college options and make informed choices. That meant giving them federal grants and loans directly, which the students could use to go to the institution of their choice. Legislators chose this structure despite higher education associations lobbying for federal funds to go directly to institutions.
The new laws created an academic marketplace which forced colleges to compete for applicants. Giving students choice was wildly popular, turning student financial aid programs into the second largest category of federal expenditures on higher education, trailing only sponsored research grants to universities. But by not fully paying for college, the 1972 financial aid policies left students and parents grappling with how to cobble together a combination of federal grants and loans along with scholarships from institutions and a family contribution to pay tuition bills.