The purpose of this paper on U.S. federal higher education policy is to discuss how market-based federal higher education funding policies over the last five decades has led to consequences that have been detrimental to student access at American public colleges and universities. Evidence shows increasing inequality in higher education opportunities for low income and underrepresented students due to the redeployment to the private sector of public funding. Since the passage of the federal direct student aid funding policy, the United States has fallen from first among OECD countries in bachelor's degree attainment for 25-34 year olds to sixteenth in bachelor's degree attainment, and eleventh in lower levels of tertiary attainment for the same age group. For the first time in U.S. history, the younger generation is being less well-educated than the generation before them. This paper highlights the problematic market-based federal funding policies that have aided this educational attainment decline and increased inefficiency in higher education. It also calls for new federal funding policies and directives to incentivize states to reinvest in its public colleges and universities in order to improve affordability and decrease student indebtedness.