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Why is college so expensive?

Overhead view of college campus
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It’s no secret that higher education in the U.S. is expensive; data from the National Center for Education Statistics shows that the average cost of tuition and fees at public four-year schools grew by 13 percent from 2010-11 to 2019-20, and it’s only continuing to rise. Colleges are spending more on campus improvements while receiving less funding from states — all of which translate to higher costs for students.

3 reasons why college tuition is rising

Students applying for college — and their parents — may be met with sticker shock when they see the total cost of attendance for school. Even for in-state schools, College Board estimates the annual undergraduate budget to be nearly $30,000. That number rises to almost $45,000 for out-of-state schools. There are three main reasons for this: growing demand, a shortage in state funding and outsized investment in student services.

Increased demand bumps up rates

A college education has become a rite of passage for many students in America, and studies continue to show that college graduates are more likely to become higher earners than those without a degree. The U.S. Bureau of Labor Statistics reports that in 2020, those with a bachelor’s degree earned a weekly salary that was 67 percent higher than those with a high school diploma and had an unemployment rate that was 39 percent lower.

This social and financial pressure increases the public demand for these institutions, and growing demand allows colleges to charge more for their services. Many colleges have also invested in better amenities to attract incoming students, which translates to higher fees for those students.

Colleges are receiving less money from state governments

A 2019 report from Center on Budget and Policy Priorities points to cuts in statewide higher education funding for the rapid tuition increase in the last decade. “Overall state funding for public two- and four-year colleges in the school year ending in 2018 was more than $6.6 billion below what it was in 2008 just before the Great Recession fully took hold, after adjusting for inflation,” the report reads. “In the most difficult years after the recession, colleges responded to significant funding cuts by increasing tuition, reducing faculty, limiting course offerings, and in some cases closing campuses.”

Though many colleges received federal funding during the pandemic and available financial aid for students continues to increase, neither of these factors solve the systemic issue of reduced state funding — one of the primary contributors to elevated tuition costs.

Institutions are investing heavily in student services

While amenities and accommodations are big players in the increasing institutional costs, rising administrative costs are also to blame.

A 2021 study from the American Council of Trustees and Alumni found that colleges are spending more on administrative services than ever before. Between 2010 and 2018, spending on student services and administration grew by 29 percent and 19 percent, respectively, while spending on instructional staff grew by only 17 percent — despite no concrete benefits of that increased budget.

“Institutional spending continues to rise while contributing little to graduation rates,” the report reads. “Increases in per-student spending on instruction, administration, and student services were each correlated with an increase in tuition for the next academic year, even after controlling for levels of appropriations and institutional characteristics.”

How students can afford college

Despite the growing costs, there are still ways for students to afford a degree — and in some cases even go to college for free.

Prospective students should, first and foremost, fill out the Free Application for Federal Student Aid (FAFSA). Even if you don’t think that you’ll qualify for federal aid, you may be surprised at what’s open to you. It costs nothing to fill out the FAFSA, and it’s the only way to see what federal grants, loans and work-study opportunities are available.

Some common ways students pay for college are:

Many students use a combination of some or all of these options to chip away at educational expenses. With the right blend of financial aid, it’s possible to bring down the high costs of college to a more reasonable level.

Learn more:

Written by
Hanneh Bareham
Student loans reporter
Hanneh Bareham specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand.
Edited by
Student loans editor
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