The Hidden Costs of College: Why Tuition Keeps Rising

The cost of attending college in the United States has risen dramatically over the past few decades. According to erudera.com, between 1985 and 2019, the average cost of college tuition increased by 404% at public 4-year institutions and 313% at private non-profit 4-year institutions, adjusting for inflation. This rate of increase is more than double the overall rate of inflation during this time period. As a result, the average annual cost of attending a 4-year public college is now over $25,000, while the cost for a 4-year private college is over $50,000 per year. With such staggering increases, many students and families are wondering why exactly college has become so expensive and whether it's even worth the investment anymore. This article will analyze the complex web of factors that have contributed to the skyrocketing cost of higher education.

Increased Demand

College applications have surged in recent years as more students aim to pursue higher education. According to Forbes, applications for Fall 2023 admission increased by 11% compared to 2019 levels, with even steeper rises among minority and first-generation applicants. For Fall 2024, early data indicates another double-digit percentage jump in applicants from forbes.com 2024 show strong early surge.

This application boom reflects the rising importance of college degrees in the modern economy. As more jobs require advanced skills and credentials, high school graduates increasingly view college as a necessity rather than an option. With intense competition for good jobs, students feel pressure to stand out with prestigious degrees. The Covid-19 pandemic also led many to pursue higher education when other opportunities were scarce. Overall, this heightened demand places strain on limited college capacity.

State Budget Cuts

State funding for public colleges and universities has declined dramatically over the past few decades. In the 1980s, states provided nearly 80% of funding for higher education institutions, but that number has dropped to below 50% today per cbpp.org. This decrease in state appropriations has shifted the funding burden to students via tuition hikes.

Between 2008-2018, average state funding per student fell by 16% while net tuition rose by nearly 37% . Most states have failed to restore higher education funding to pre-recession levels. The cuts have been most severe at public master's and community colleges, which serve large numbers of low-income and minority students. Declining state investments have compromised the quality and accessibility of public higher education.

Administrative Bloat

One major factor driving up the cost of college is the growth in spending on non-academic services and administrators at universities and colleges. A report from the New England Center for Investigative Reporting found that between 1987 and 2011, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. This increase in administrators is referred to as "administrative bloat."

According to the Department of Education, at public, four-year universities, spending on instruction costs on average $4,984 per student, while spending on student services such as deans and advising costs $1,984 per student. In other words, nearly 30 cents out of every tuition dollar now goes to subsidizing administration and staff instead of faculty teaching and serving students directly. A report by the Center for College Affordability and Productivity found that between 1976 and 2018, the number of full-time administrators and other professionals employed by colleges and universities increased by 164% and 452%, respectively. This rapid increase in administrative staffing far outpaced enrollment growth over the same period.

While some administrative positions focus on important student services, critics argue schools are overspending on excessive layers of upper management that have little impact on academics or learning. Money spent on non-essential administrators and programs ends up raising tuition costs for students.

Amenities Arms Race

Colleges have been investing heavily in new buildings and amenities as part of an "arms race" to attract students. According to Forbes, schools are competing to offer luxury dorms, recreation centers, dining halls, and other expensive facilities. This amenities race drives up the cost to attend these schools. As one example, the University of Missouri opened a $36 million recreational complex with a lazy river and three-story climbing wall. While these amenities are attractive to prospective students, they require substantial investment from the colleges. Ultimately students end up paying higher tuition to fund these lavish facilities. The arms race puts pressure on colleges to spend more or risk falling behind peers in attracting applicants. Rather than academic factors, decisions increasingly come down to which school has the newest fitness center or technology-filled dorms. Critics argue schools should focus spending on educational quality and affordability over amenities.

Labor Costs

A major factor driving up the cost of college is the increase in salaries for faculty and staff, which have been rising faster than inflation according to a report from the California Faculty Association. Between 2009-2019, salaries for CSU faculty increased by 20-25%, while the consumer price index only rose by 13.5%. This salary growth outpaced inflation and state funding, putting pressure on colleges to raise tuition and fees. While competitive salaries are needed to attract quality faculty, the rapid growth has made it difficult for many public colleges to keep pace. Some argue that faculty salaries should be better aligned with inflation and revenue growth to curb college cost increases. Others counter that salaries must rise to retain talent, and states should increase appropriations rather than forcing students to bear the burden through higher tuition. Regardless, labor costs are a significant driver of rising college prices.

Government Aid

Government aid and subsidies for higher education, such as grants, loans, and tax benefits, aim to make college more affordable and accessible. However, some research suggests this aid may also enable colleges to raise tuition prices beyond what students could otherwise afford.

One study found that for every dollar increase in subsidized federal student loans, tuition tends to increase by 65 cents. This indicates that increased government aid provides colleges with more revenue from students who can now pay higher tuition costs due to that aid. Essentially, it incentivizes colleges to capture the aid as additional tuition revenue rather than making college more affordable per downsizinggovernment.org.

Other analyses reveal similar effects of government grants on tuition. For every dollar in grant aid to students, tuition prices tend to rise by 50 to 70 cents over time. Again, this demonstrates that government subsidies get absorbed into higher tuition prices rather than directly reducing costs for students.

While government aid aims to improve college accessibility, it may have the unintended consequence of fueling tuition inflation. Colleges raise prices knowing students have more financial means through grants and loans. This dynamic shifts the cost burden from the institution to the government and students per tcf.org.

Accreditation

Accreditation refers to the review process that colleges and universities undergo to demonstrate they meet certain standards of quality. While important for ensuring quality education, the accreditation process also significantly contributes to rising college costs insidehighered.com.

Accreditors impose strict regulations and requirements on colleges in order to receive or maintain accreditation status. Meeting these standards necessitates investments in assessment systems, data collection, strategic planning, governance structures, and other areas. A 2014 study found that accreditation accounts for 3-5% of college expenditures cedars.cedarville.edu. Senator Mike Lee argues that the "massive compliance costs" of accreditation force tuition increases lee.senate.gov. While important for quality, the substantial costs of accreditation compliance get passed onto students in the form of higher tuition.

Athletics Spending

College sports, especially football and basketball, have become major revenue generators for many schools. The budgets for sports programs and facilities have ballooned, with spending on Division 1 athletics reaching over $15.8 billion in 2019 pbs.org. The 65 schools in the "Power 5" athletic conferences spent $8.5 billion in 2022, a 10-year increase of 32% ncaaorg.s3.amazonaws.com.

Much of this spending gets passed on to students in the form of mandatory fees and tuition hikes. A 2016 study found Division 1 schools with football teams charged students $160 to $2,500 more per year. While athletic programs are supposed to be self-sustaining, costs often exceed revenues and require subsidies from student fees and the overall institutional budget. Students end up shouldering more of the burden for lavish sports facilities and high coach salaries.

College Tuition Has Risen Significantly Faster Than Inflation

The cost of college tuition has risen significantly faster than inflation over the past several decades. This rapid increase has made attending college prohibitively expensive for many students and families. There are several factors that have contributed to the rising cost of tuition, including reduced state funding, administrative bloat, spending on amenities and athletics, among others from Analysis: College Tuition Has Outpaced Inflation by More Than 3x Over the Last 40 Years.

The high cost of college tuition has broad societal impacts. It deters many qualified students from attending college or forces them to take on massive debt. This debt burden hampers graduates' ability to make major purchases like cars and homes, which has negative ripple effects on the broader economy. The skills gap also widens, as industries face shortages of college-educated workers. Ultimately, the trend of exponentially increasing tuition is unsustainable. Colleges must find ways to control costs and provide more affordable access to higher education. Doing so will yield benefits for individual students as well as the nation as a whole.

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