Why Is College So Expensive?

• Higher education costs have increased more than 170% over the last 40 years.
• Lack of regulation of tuition costs along with increased expenses raise total costs for students.
• Administrative overhead and demand for more student services also increase costs.

The cost of a college education has risen exponentially over the last few decades. According to data from the National Center for Education Statistics (NCES), between 1980 and 2020, college costs have increased by 172%.

But for the first time in more than 30 years, this steady rise is showing signs of slowing down. During the 2021-2022 academic year, average tuition and fees rose at a slower rate than inflation.

Despite this slowdown, the problem of rising costs still persists. And with ever-increasing costs comes mounting student debt. As of this year, about 46 million U.S. borrowers collectively owe more than $1.75 trillion in student loans.

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.

Increased college costs coupled with the national debt crisis have caused droves of students to think twice about attending a four-year school. But many still feel compelled to pursue a traditional college degree to increase their upward social mobility.

More than ever, students and families have to weigh the burden of college expenses against the benefit of a postsecondary degree. But why is college so expensive in the first place? 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 2021 report shows just how much average college tuition has jumped in recent years. From the 1991-1992 to 2021-2022 academic years, average tuition and fees nearly doubled at private four-year institutions and more than doubled 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.

State Funding of Public Universities Over Time

Although a 2021 College Board report indicates that state-level funding for higher education has increased in recent years, states contribute less per student now than in the past as a percentage of total public spending on higher education.

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 2019 Pew report supports this finding, showing that state-level funding has decreased relative to federal spending for higher education over the last two decades.

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.

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.

Though plans for broader free community college seemed likely in early 2021 through Biden’s Build Back Better domestic spending bill, late last October the provision was cut from the bill in a bid to gain the support of Democratic Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who both opposed the policy.

With these plans stalled for the foreseeable future, degree-seekers' best choice is to take advantage of cost-efficient education options like free-tuition programs 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.