Over the last 20 years alone, the cost of education at public 4-year institutions has increased by a staggering 179.2% for the average student.

With the average cost of an undergraduate degree ranging from $25,707 to over $218,000 depending on a student’s resident status and institution, it’s natural to wonder why college is so expensive. From increased demand for higher education to waning government funding, there are many factors contributing to the high-and-rising costs of attending a college or university in the United States.

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 students, College Board estimates the annual undergraduate budget to be nearly $30,000. That number rises to more than $45,000 for out-of-state students. There are three main reasons for this: growing demand, a shortage of in-state funding and outsized investment in student services.

1. 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. In 2021, those with a bachelor’s degree earned a weekly salary that was 65 percent higher than those with a high school diploma and had an unemployment rate that was 43 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 student fees.

2. Colleges are receiving less money from state governments

In 2020, most state legislatures contributed less to public education than in 2008. While some states have appropriated more funds for higher ed in subsequent academic years, others continued to cut higher education support– and then, of course, there is inflation to consider.

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.

3. 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 found that colleges spend more on administrative services than 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 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. Plus, some financing opportunities require the FAFSA even if you don’t qualify for funding directly through the government.

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.

Bottom line

Ultimately, persistent inflation, rising administrative costs and reduced state funding for higher education keep college costs high– and they continue rising. While it is tempting to blame inflation alone for expensive college education, it is important to remember that the ballooning costs of tuition and fees far outpace inflation alone. Overhead expenses, an ever-increasing demand, and competitive campus amenities drive costs up, as well.

For students looking to pursue a college education, there are many options for funding, including college savings plans, student loans, and work-study programs. Student loan forgiveness programs can help graduates to recoup some costs, depending on their field of study and career plans.