Why Is College So Expensive?
Published on March 13, 2020
- Total student loan debt surpassed $1.5 trillion in 2019 with no signs of slowing down
- Tuition costs generally increase proportionally with rising higher education expenses
- Reduced state funding for public colleges decreases college affordability
- Administrative overhead and demand for more student services also increase costs
Student loan debt continues to rise. According to the Federal Reserve Bank of New York’s Center for Microeconomic Data, outstanding student loan debt totaled $1.51 trillion at the end of 2019.
Mounting college debt is linked with ever-increasing college expenses. The National Center for Education Statistics (NCES) tracked tuition, room and board, and other college costs for public and private universities from 2016-2018 and found considerable increases year over year.
A full-time, in-state student at a public university paid $19,488 during the 2016-2017 school year, but $20,050 during the 2017-2018 school year. A student at a private, four-year school paid $41,465 in 2016-2017, but $43,139 the following year.
Today’s college students face not only bigger loan amounts than in the past, but also more barriers to paying these loans off in the form of stagnant wages and rising costs of living across the country.
Despite the costs, many students (and parents) feel compelled to take on student loan debt. One reason might be that a college education is strongly correlated with upward social mobility. Yet, research from Opportunity Insights finds that low-income students’ access to high-mobility colleges has been declining since 2000.
More than ever, students and families have to weigh the burden of college expenses against the benefit of a college degree. But why is college so expensive? Here are a few of the reasons why the average cost of tuition has skyrocketed.
Rising Expenses, Rising Tuition
The College Board’s Trends in College Pricing 2019 report shows just how much average college tuition has jumped in recent years. From the 1989-1990 to 2019-2020 academic years, average tuition and fees more than doubled at private four-year institutions and tripled at public four-year institutions.
Part of the reason why colleges charge more now is because of increasing expenses for educating and housing students at both public and private universities, according to research from the Lumina Foundation, an education nonprofit. These expenses include instruction and administration, athletic programs, student health care, food service, housing, maintenance, as well as a more modern expense — marketing.
Reduced State Funding for Public Universities
Another reason college is so expensive in some cases is that state and federal funding for public universities continues to decline. Lumina Foundation research shows that government subsidies for higher education amount to little more than half of the total education revenue received by public colleges and universities. This is significantly less than during the late 1980s, when public support amounted to 77% of this same revenue nationally.[A report from The College Board] notes that 2017-2018 state and local funding per student was 9% lower than a decade earlier and 10% lower than in 1987-1988.
The funding amount varies widely from state to state, according to research from the University of California, Berkeley. For example, Wyoming covers 86% of costs, allowing the state’s public institutions to lower tuition. At the other end of the spectrum, New Hampshire covers only 16% of costs with taxpayer funds.
The College Board’s 2019 trends report provides more examples of these wide funding disparities. From 2017-2018, state and local funding for public higher education ranged from $3,190 in Vermont to $17,700 in Alaska. The report also notes that 2017-2018 state and local funding per student was 9% lower than a decade earlier and 10% lower than in 1987-1988.
Students Demand More Services
In addition, student expectations about what types of services universities should provide continue to change and grow. For example, many students want better career services to help them find internships and jobs after graduation.
Students also expect schools to offer state-of-the-art facilities, far-ranging student resources, as well as the latest technology — from VR headsets to 3D printers.
As schools invest more to meet student expectations, costs to students go up.
Costly Administrative Overhead
You might assume that big tuition checks pay professor salaries, but it’s actually the overhead for administrator positions that puts the biggest burden on university pocketbooks.
A 2019 book on the tuition crisis highlights high administrative costs at American universities. For example, at public universities in Alaska, California, and Texas, administrators and administrative costs have exceeded growth rates for educational staff and faculty.While administrative costs can't take all the blame for tuition increases, studies show that universities and colleges have had to offset such expenses by raising tuition rates.
Perhaps even more alarmingly, these universities had no tracking systems in place for administrative spending, nor tools to compare budgets to actual spending.
When California conducted a state audit on University of California colleges, they found hidden surpluses, misappropriated funds, and excessive administrative salaries.
While administrative costs can't take all the blame for tuition increases, studies show that universities and colleges have had to offset such expenses by raising tuition rates.
Private Colleges and For-Profit Universities
Many for-profit colleges and private universities charge considerably higher tuition than their public counterparts, without offering the same level of financial aid that might make them realistic options for low-income students.
Since many smaller colleges are in lower sports divisions, they also don't tend to offer athletic scholarships, further limiting available aid.
Many students and parents who have paid higher tuition for small private colleges wonder if it was all worth it. While these colleges tend to have certain perks in common, like lower student-to-faculty ratios, some reviews of small, expensive colleges on the website Niche lament older dorm buildings, fewer campus activities, marginal academic quality, and a lack of diversity.
Tuition Prices Aren't Regulated
Unlike other countries, the United States does not cap tuition costs. Research shows that one-third of developed countries provide free higher education while another third caps tuition at very low amounts — often less than $2,400 a year.
Meanwhile, tuition costs in the United States continue to rise without regulation. To find students capable of paying, many universities try to attract more out-of-state and foreign applicants. Out-of-state students often pay double the cost that in-state students do; foreign students can pay triple the amount.
How to Make College More Affordable
While no college affordability policies have passed into law, a number of efforts at the state and national levels look to make college degrees more financially attainable.
For example, nearly half of U.S. states already offer some type of free tuition program for two-year institutions. Program participants can receive an associate degree for as much money as it takes to cover books and fees, then either enter the workforce or transfer to a four-year college
In 2019, House Democrats offered a broader solution, called the College Affordability Act. Lawmakers sought to provide more financial aid and lower student debt while boosting social mobility and making colleges more accountable for student outcomes, like timely graduation and job placement
While students and families wait for this proposal or a similar one to become law, degree-seekers can take advantage of cost-efficient education options like free tuition at two-year colleges and dual enrollment for high schoolers.
If you're struggling to figure out how to afford college amid rising costs, check out the BestColleges guide to graduating debt-free.
John Boitnott is a longtime journalist and content marketing consultant who writes for multiple financial publications. He has written for Inc., Entrepreneur, BusinessInsider, NBC, USAToday, Venturebeat, and other media outlets.