Need based tuition scholarships do not come close to explaining the extraordinary rise in tuitions. The real reason is decreased state funding (for public universities) and government-guaranteed student loans (affecting all universities).
Without student loans, colleges would only be able to charge what the market can bear. No entity can violate this ironclad law of economics. If families can't pay the amount of tuition that you charge, you're not getting that amount of tuition, period. Loan availability increases the amount that families can afford to pay. In principle, there is nothing wrong with this idea, and in fact if the free market were allowed to determine loan availability, the system as a whole would quickly converge onto the optimal amount of loan availability. Under this hypothetical free-market scenario, banks wishing to make student loans would have to vet their students properly and make sure with reasonable confidence that they will be repaid. If the free market were at work, there would be a natural market-based limit on the amount of loan money available, simply because not every student is going to represent a good investment.
Unfortunately, what we have right now in the student loan market is not even close to a free market. The dominant lender is the government, and even in the case of privately held student loans, the laws and regulations governing student loans are highly and artificially favorable to the lenders. To give just a few examples, unlike any other form of loan, student loans (including private loans) can almost never be discharged in bankruptcy; cannot expire from statute of limitations; allow the lender to garnish wages, tax refunds, social security, and disability payments without a court order; and repayment is guaranteed by the government, even if the borrower defaults (but the lender can still pursue the borrower for repayment even after the government makes them whole). The result of such amazingly biased and favorable laws is exactly what you would expect: lenders throw money at students far out of proportion to the actual amount of money that it would make economic sense for them to lend under ordinary circumstances. Having this much money supply available in the system is then the primary factor that enables and allows ridiculous increases in tuition.
I don't have school age children yet, but I will soon. I have no intention of taking out loans or making them take out loans, no matter how hard it is to achieve this goal. I would love to compete on a level playing field with other similarly responsible parents, but unfortunately I'm not going to have that chance. Instead I'm going to have to compete with irresponsible borrowers who have borrowed way more money than anything that remotely makes sense for them to borrow.