That's false. The Federal Government has massively increased its funding via guaranteed loans. What changed is how the government is doing the funding: now the Feds are printing huge profits - more than Wells Fargo and JP Morgan's annual profits combined - via the interest. The net result is a very large increase in the amount of dollars flowing toward universities over the last 15 years courtesy of the Federal Government's guarantees. Further, the Federal Government increasingly owns most of the student loans that exist.

Federal funding didn't decrease, the nature of the money being made available shifted into a very easy to get loan that the Feds now make money off of. Not only do they print huge profits on it, they also ensure the laws remain such that you can't discharge the debt, to their own benefit. This has helped replace the red ink that Social Security is now generating, as previously the Feds were stealing from SS funding instead of actually safe-guarding the inbound revenue flows. Now they can't steal from the positive SS flows, so they had to come up with a 'revenue replacement' - what better way than to hitch young workers to massive debt they can't get rid of, yielding a perpetual interest bonanza for Federal spending. It will generate over half a trillion dollars in interest for the Feds in the next ten years.

This is one of those things that gets tricky because of the number of factors involved. I've watched this debate at my alma mater for a decade or so and its boiled down to this:

As state funding decreased, lottery scholarship funding increased almost in parallel.

As lottery scholarships increased, tuition increased.

Administrative costs skyrocketed.

Lastly and most importantly though, when people in high school take out student loans they have no concept of what debt repayment looks like or feels like. They have no idea what taxes coming out of your paycheck looks like in terms of cash flow. They have no concept of housing costs in that cash flow. Job loss or gaining employment is not factored in and what THAT does to cash flow and debt payments.

When students graduate all they know is that they got into school X and they need to pay for it.

The one true check on prices going up despite ALL other factors is the number of people who will say "not for that price" which thanks to student loans is virtually nonexistent because even if you say that somebody else will just slide into your spot.

Pure supply and demand. If cost is not a check on demand, cost will increase.