Let's start with a quick survey of the numbers. Between graduate students and undergrads at both four-year and community colleges, students paid just under $60 billion in tuition to attend state institutions of higher learning in fiscal year 2012. That's the giant magenta slice of the graph below, released this week by the State Higher Education Executive Officers Association. And just in case that figure sounds suspiciously low to you, the Department of Education reports that in the 2009-2010 school year, public colleges made about $57 billion off tuition (page 268, for those interested).

That's our threshold: About $60 billion. Now how much does Washington spend on aid? According to the New America Foundation, the federal government appropriated some $77 billion worth of it in 2012 via a giant salad of tax breaks and grants, shown in yellow and orange below. The money we'd need for this grand experiment is already there.

To be sure, a good chunk of that funding already subsidizes state colleges. Take Pell Grants for low-income students, which currently cost Washington about $35 billion annually.* In the 2010-2011 school year, roughly 61 percent of that money, or $22 billion, went to students at public institutions.

But that doesn't change the big picture: With the money that's either going to private colleges, or or being paid to the public sector in a roundabout way via tax breaks, we could probably make tuition at public institutions — which educate about 76 percent of American undergrads — either free, or ridiculously cheap. The question then becomes whether that's a vision of higher education finance that we would want to embrace, and if it is, whether it would be a feasible policy.

What We're Doing Now Is Crazy

My instinct is that the answer to both those questions is yes. Many of the problems with higher education today can be traced back on some level to our current approach to aid, which has come to resemble a dog chasing its own tail. Since 1987, the SHEEO reports that states have cut per-student funding for schools by about 44 percent. The schools, in turn, have raised tuition. The federal government has swooped in with more generous grants, tax breaks, and low-interest loans to compensate. Yet, the availability of all that financial aid has probably allowed colleges to hike up tuition without worrying much about enrollment. It's also paved the way for more state budget cuts. So round and round we go.

Despite some of what you might have read, these problems haven't actually turned college into a bad investment. Going and graduating is still probably the best financial decision anybody not named Gates, Jobs, or Zuckerberg can make in their lives. But the persistent rise in costs have made college a progressively worse deal with each passing year. Perhaps more importantly, it's turned higher education into a much bigger financial gamble for marginal students at risk of dropping out — which, sadly, describes most young people who ever step foot in a college classroom.