Why Has The Cost Of Education Increased?

11.02.2023 Grady A. Lowry 0 Comments

Why is college so expensive? There are a lot of reasons — growing demand, rising financial aid, lower state funding, the exploding cost of administrators, bloated student amenities packages. The most expensive colleges — Columbia, Vassar, Duke — will run you well over $50K a year just for tuition.

That doesn’t even include housing! The cost of college is out of control.
So what can you do to fix it? Well, nothing really, but if you’re smart, you can work around it, especially with the opportunities afforded by the growing online college sector.
We’ll find out why college is so expensive, and we’ll tell you how you can cut costs.

The cost of college is crazy. Take it from us. This is all we do and we’re constantly blown away by the eye-popping pricetag for some college degrees. Do you know that tuition for public colleges alone more than quadrupled between 1980 and 2015? According to CNBC, college tuition was far more affordable for older generations.

Citing figures from College Board, CNBC reports that, adjusting for inflation, the cost of private schools rose by 129% since the 1980s. The cost of public school rose by an even more staggering 213%. By contrast, wages across the board have increased by just 67% since the 1970s. A college degree still provides advantages to its holder, but Business Insider, concedes that these advantages are lesser than they were just a decade ago.

Meanwhile, according to CNBC, students graduate with an average of $37,172 each. All of this amounts to $1.5 trillion in collective student loan debt shared amongst 44 million Americans. Since we’re all here to learn, I’ll ask a purely academic question.

Why is college so freakin’ expensive? And why does the cost continue to climb if the value proposition is on the decline? I’m not an economist, so I won’t make any font-bold predictions about this big education bubble bursting any time soon. Even with these shrinking advantages, graduates still earn more than non-grads over the course of a lifetime.

But what are some of the causes behind this explosion in cost, and what can you, as the consumer, do about it? If you just want to skip to the part where we tell you about the cheapest online schools, go ahead and check out The Most Affordable Online Colleges for Bachelor’s Degrees,
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Contents

1 Why the price of tuition has been increasing so rapidly?
2 Why is college so expensive 2022?
- - 2.0.1 When did college become so expensive?
- 2.1 What is the main contributor for increased tuition costs for students?
3 How does inflation impact education?
4 Why is there so much pressure on college students?
- - 4.0.1 Why is college tuition inflation so high?
5 Why do you think tuition fee has increased significantly in the past decade?

Why the price of tuition has been increasing so rapidly?

Rising Demand and Limited Supply – Between 1990 and 2020, the total number of college students in the U.S. increased from 13.8 million to nearly 20 million, The flock to college campuses comes from the widespread perception of the college degree as the ” golden ticket ” to the middle class.

Employers also contributed to this trend because of their increasing preference for degree-holding candidates. The pressure to pursue higher education and the competitive admissions process means students will pay higher amounts in tuition, prompting colleges to raise their prices. Unlike other expensive goods and services that drive a certain demographic out of the market — for example, a luxury car or a lavish vacation — the pressure to get a degree means families that cannot afford the cost of higher education will still find a way to pay.

Usually, the cost of products and services decreases over time as new providers enter the market. Examples include electronics, toys, apparel, and airline tickets. One of the main reasons this has not happened in higher education is large barriers for new schools.

One barrier includes securing accreditation, which is a time-consuming, rigorous process. This creates an oligopoly, or a market with limited competition, in higher education. This lack of competition discourages the leveling effect of supply and demand that should theoretically keep prices from skyrocketing.

And the decreasing number of colleges due to closures and mergers will not help to alleviate this problem.
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Why has the cost of college risen in the US?

Over the last 30 years, tuition costs have soared for a variety of reasons. State funding cuts, expanding administrative staffs, and increased construction and facility costs all play a role. As a result, the average student debt among college graduates is now close to $28,000.
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What are 3 reasons why the cost of college is increasing?

That doesn’t even include housing! The cost of college is out of control. So what can you do to fix it? Well, nothing really, but if you’re smart, you can work around it, especially with the opportunities afforded by the growing online college sector. We’ll find out why college is so expensive, and we’ll tell you how you can cut costs.

Citing figures from College Board, CNBC reports that, adjusting for inflation, the cost of private schools rose by 129% since the 1980s.
The cost of public school rose by an even more staggering 213%.
By contrast, wages across the board have increased by just 67% since the 1970s.
A college degree still provides advantages to its holder, but Business Insider, concedes that these advantages are lesser than they were just a decade ago.

Why is college so freakin’ expensive? And why does the cost continue to climb if the value proposition is on the decline? I’m not an economist, so I won’t make any font-bold predictions about this big education bubble bursting any time soon. Even with these shrinking advantages, graduates still earn more than non-grads over the course of a lifetime.

Why is tuition increasing faster than inflation?

The reasons for such an rise in tuition can be attributed to a variety of factors including less state funding, an increase in demand, and even an increase in the amount of federal aid awarded.
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Why is college tuition inflation so high?

While summarizing Guy Kawasaki’s latest book, Wise Guy, I read that his Stanford tuition in 1972 was $2,850 and that today it’s $62,000. According to the Bureau of Labor Statistics CPI Inflation Calculator, if Stanford tuition increased at the pace of overall inflation, it would be $17,007 today.

That means that Stanford tuition has increased 3.64 times faster than general inflation.
Other colleges are in the same boat more or less.
I suspect that few of my readers are surprised by this as it’s in the news a lot.
The reasons why are available, but I didn’t find them neatly summarized in one place.

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They vary from one institution to the next, but the reasons below apply to all schools to some degree. Let me know if I missed any. Less Money From the States: According to Doug Webber at 538.Com, the single biggest driver of rising tuitions for public colleges by far has been declining state funding.

As costs from things like health care and pensions increase, states have to find cuts somewhere to balance their budgets. State budget builders know that colleges can get away with steep increases, so college support has been slashed. Construction and Amenities: When people from my era (late 1960s) visit our alma maters, we hardly recognize them.

Specialized buildings of all kinds abound, and university fitness centers compete with the finest private clubs. Many colleges even sport climbing walls and lazy rivers. Bloated “student fees,” which aren’t included in tuition, may cover some of this academic bling.

Such amenities attract students and professors, so colleges have to compete.
Fancy research facilities are also necessary to attract top professors and nerdy students.
If you want to attract top athletes, you need souped-up facilities as well that go far beyond shiny game-day venues.
Don’t be surprised if the athletic department has one or more large buildings all to itself.

In 2017 alone, U.S. universities and colleges spent $11.5 billion on construction, an all-time high. Administrative Bloat: Administrative staff including fundraisers, financial aid advisers, global recruitment staff, and many others grew by 60 percent between 1993 and 2009.

This is 10 times the rate of growth of tenured faculty positions.
We also have more in the way of services for things like counseling and academic tutoring.
Gyms and other facilities need to be supervised, cleaned, and maintained.
Student Loans: Yearly student-loan originations grew from $53 billion to $120 billion between 2001 and 2012.

Meanwhile, average tuition rose 46 percent in constant dollars during that same time frame. Since students can borrow enough to pay the higher costs, schools are less inclined to keep costs in line. College Sports: The Chronicle of Higher Education recently estimated that college athletics is a $10 billion marketplace.

With very few exceptions, most colleges and universities rely on what the NCAA calls “allocated revenue.” This includes direct and indirect support from general funds, student fees, and government appropriations.
In other words, most colleges subsidize their athletics programs, sometimes to startling degrees.

There are a few institutions that make money off their sports programs, but for the vast majority, sports are a loser. This includes “Olympic” sports like rowing, fencing, and sailing. If your school has elite sports, your students are subsidizing them.

I suspect that you will find few poor students indulging in these country-club-style activities. Polo anyone? Textbooks: Here is another significant cost not included in the tuition. While the price of recreational books has dipped in the past 15 years, the price of textbooks has increased nearly twofold.

A reason for this is the oligopoly in the higher education publishing industry. Four major publishing companies control more than 80 percent of the market, and professors, who are less price-sensitive, pick the books. The average cost has risen four times faster than inflation over the past 10 years.

That has caused 65 percent of students to skip buying required texts at some point.
Many textbooks are bundled with internet “access codes” that expire at the end of the semester.
This forces students to buy books at retail prices at campus bookstores that are worthless in the resale market.
Compensation: Presidents lead the league.

As of 2015, average pay for private-college presidents in the United States surpassed $550,000, with 58 presidents taking home more than $1 million a year. The average salaries for full professors at top public institutions have risen 12 percent in excess of inflation since 2000.

While schools might pay $250,000 for a famous professor, top coaches make millions.
The top dog (Nick Saban, football coach at Alabama) makes $11-plus million not counting outside income.
Soak the Rich: According to Adam Davidson, “A school that charges $50,000 is able to offer a huge range of prices to different students.

Some might pay $10,000, others much more.” Most don’t pay full price, but those that do are one reason tuition goes up so fast. Rich people don’t think twice about writing a fat check each year. This includes rich people from other countries and states that pay even more.

David Feldman, economics professor at the College of William & Mary, tells us that “A college’s sticker price is set by its wealthiest students’ ability to pay.” Conclusion If only students could boycott colleges to keep costs in line.
College presidents, trustees, and politicians should feel some shame as they are the leaders in this cash grab.

Perhaps the fact that the college population is likely to decrease will put some pressure on schools to control costs. One forecast predicts that there will be 10 percent fewer college-going students by 2029. American colleges and universities are one of your nation’s greatest assets, but they have been burdened with unsustainable cost increases.

We all need to raise our voices and tell our leaders to stop this madness. If New York state can cap taxes for public schools at 2 percent, why can’t we expect colleges to do the same? References: American Council President’s Study 2017. Myth: College Sports Are a Cash Cow, American Council on Education, available online at http://bit.ly/2WQ9zTU.

Brown, Ann. The Cost Of College In The U.S. Has Skyrocketed. Have You Ever Wondered Why? moguldom.Com, November 27, 2018, available online at http://bit.ly/2WRYBxt, Bureau of Labor Statistics. CPI Inflation Calculator. Available online at http://bit.ly/2HDi6Xz,

Clark, Kim.
College Board Says Tuition Rose Faster Than Inflation Again This Year, Money Magazine Online, retrieved November 4, 2015 at http://bit.ly/2WGSGeu,
Jaschik, Scott.
Are Prospective Students About to Disappear? Inside Higher Ed, January 8, 2018, available online at http://bit.ly/2I2PzKw.
Awasaki, Guy (2019) Wise Guy, Portfolio/Penguin: New York, NY.

Kristof, Cathy. What’s Behind the Soaring Costs of College Textbooks, CBS News Online, January 26,2018, available online at https://cbsn.ws/2WGVb0m, Schoen, John. “Why college costs are so high and rising”, CNBC.Com, December 8, 2016, available online at https://cnb.cx/2HYPYO3,

The Scholarship System.
The Real Reason Why College Costs Are So High and What You Can Do About It, April 5, 2019 available online at http://bit.ly/2WQWDNR, TruBirch.
The Astonishing Increase In The Price Of Textbooks Since 2004, Visualized, Digg, March 9, 2019 available online at http://bit.ly/2EXb9NO,

*Image created using Pablo.com The opinions expressed in Work in Progress are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.
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When did college become unaffordable?

And yet, by 1970, college access was disrupted by double-digit inflation and a struggling economy. Tuition and fees rose alongside the inflation rate, making college — once again — unaffordable for many students.
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Why is college so expensive 2022?

Since 1985, the cost of college has been rising—most years, it’s risen faster than inflation. Reasons for the tuition hikes include a loss of state funding, higher college enrollment, and the proliferation of student loans, which disincentivizes schools to keep costs down. Let’s dive deeper into why college is so expensive and how you can cope financially.
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When did college become so expensive?

College Tuition Has More Than Doubled Since The 1980s – Students of today’s generation are facing financial struggles that were completely foreign to past generations. On top of the already difficult student loan debt challenges, students of today also have to deal with the increased costs of housing.
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What is the main contributor for increased tuition costs for students?

Coins and banknote in a glass jar placed on the textbook. Concept money saving for education. getty Over the past two decades, published college tuition has increased in price more than any other good or service besides hospital care. Tuition inflation has risen at a faster rate than the cost of medical services, child care, and housing.

While generous financial aid means that students usually pay far less than the “sticker price” of tuition, the net price of public four-year colleges has still more than doubled since the turn of the century.
Moreover, underlying costs at American colleges are the highest of any large country in the developed world.

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Source: College Board Preston Cooper/Forbes A new paper by economist Beth Akers of the Manhattan Institute (my former employer) asks why college tuition is so high and still rising. The proximate causes of tuition inflation are familiar: administrative bloat, overbuilding of campus amenities, a model dependent on high-wage labor, and the easy availability of subsidized student loans.

However, the deeper question is why the market has allowed these cost inefficiencies to persist. In most industries, competition brings down the cost of products over time. The first laptop computer cost over $5,000 in today’s dollars, but now laptops with far more computing power can be bought for $200.

Why hasn’t the same phenomenon occurred in higher education? Akers explores four potential explanations: students overestimate the return to a degree; colleges are not transparent about their true prices; too few institutions operate in each regional market; and there are significant barriers to entry for new educational providers.

Many students treat a college degree as a “golden ticket” to the middle class, Akers argues. The decision to go to college is fundamentally a cost-benefit calculation. If the financial return to college is high enough, then students should theoretically be willing to pay high amounts for tuition, because they still come out ahead in the long run.

But few students are sitting down with Excel spreadsheets to calculate the return to college; instead, they rely on impressions of how much a college degree will earn them in the long run. Yet only some degrees are worth paying top dollar. The general impression that every degree is valuable—a “golden ticket” or so to speak—pushes up students’ willingness to pay for college, and consequently inflates college tuition.

Even if that is the case, a sufficiently competitive market for higher education should still bring down the price of college.
Akers therefore identifies another problem: the true price of a college education is usually hidden.
While most students get at least some financial aid, prospective students usually don’t know how much aid they will get until after they are accepted to college.

This makes comparison-shopping across a wide swath of institutions impossible. Application fees and time constrain the number of colleges each student can apply to, so the number of colleges among which a student can compare prices may be as little as one.

Nowing that students will have few alternatives by the time they actually see what they will pay, colleges have every incentive to be stingy with financial aid.
Another factor constraining choice is that most students have limited options for higher education.
While there are thousands of accredited colleges nationwide, the typical student has far fewer options.

Most students attend a college in their home state, thanks to a combination of steep discounts for state residents, familiarity with local schools, and a desire to save money by living at home. With few competitors, colleges face less competitive pressure to provide price discounts or improve the quality of education.

High prices and few institutions should provide ample opportunity for alternative providers of education to enter the market and lower prices through competition. However, most of these alternative providers will find it difficult to access federal financial aid, which means that the playing field is not level between traditional schools and new ones.

All colleges must be accredited to access federal aid, but the accreditation system is typically hostile to new players. Accreditors often judge schools based on factors such as curriculum and faculty rather than whether they achieve better student outcomes for a lower price.

This system disadvantages schools with newer and cheaper but potentially more effective educational models.
These problems are deeply ingrained in America’s higher education system, and reversing them will take work.
Akers has several proposals to address them, which fall into two main groups.
The first prong of her strategy is transparency.

Better data on financial aid and net prices should be made available and accessible, along with data on typical earnings after graduation. This will help inform students whether a particular college degree is worth the cost. The second prong involves opening the higher-education marketplace to competition by removing accreditors from their role as gatekeepers of federal financial aid, and instead allocating funds based on student outcomes.

Not only will this encourage new entrants, but it will force existing universities to search for cost efficiencies and lower their prices to compete. Industries like higher education have seen enormous cost growth over the past decades, even as the cost of other goods and services has fallen. Price transparency and robust competition have gone a long way towards reducing prices in other industries.

The higher education system should follow their lead.
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How does inflation impact education?

Inflation and its Impact on Students’ Daily Lives – The main way inflation reduces the value of a student’s dollar is by raising the prices of everyday essentials, such as food, shelter, and transportation. “Colleges factor these expenses into their cost of attendance, which dictates aid/loans awarded and available to students annually.

But if inflation impacts these things after COA/loan money has been approved and awarded for the year, this can make those dollars’ purchasing power go down vs. what was intended,” says Meagan Landress, a Certified Student Loan Professional and consultant at Student Loan Planner, For students who often rely on their college’s calculation of the overall cost of attendance, how hard inflation hits depends on timing.

Those starting or continuing school this fall will likely see their tuition continue to rise. Tuition is one of students’ biggest expenses and has already been locked in at these inflationary levels, says Robert Farrington, founder of The College Investor,
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Why is there so much pressure on college students?

Why are you stressed? – College students commonly experience stress because of increased responsibilities, a lack of good time management, changes in eating and sleeping habits, and not taking enough breaks for self-care. Transitioning to college can be a source of stress for most first-year students.

Some predictable stressful times include studying for exams, competing for admissions or internships, and trying to master large amounts of content in small amounts of time. Sudden changes, unexpected challenges, or traumatic events can be unpredictable sources of stress. Students are expected to make decisions about their careers and academic life and foster new meaningful relationships in their time in college.

Take a moment to think about the things in your life that may be causing you stress so that you can better address it effectively.
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Why is college tuition inflation so high?

That means that Stanford tuition has increased 3.64 times faster than general inflation.
Other colleges are in the same boat more or less.
I suspect that few of my readers are surprised by this as it’s in the news a lot.
The reasons why are available, but I didn’t find them neatly summarized in one place.

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Such amenities attract students and professors, so colleges have to compete. Fancy research facilities are also necessary to attract top professors and nerdy students. If you want to attract top athletes, you need souped-up facilities as well that go far beyond shiny game-day venues. Don’t be surprised if the athletic department has one or more large buildings all to itself.

This is 10 times the rate of growth of tenured faculty positions.
We also have more in the way of services for things like counseling and academic tutoring.
Gyms and other facilities need to be supervised, cleaned, and maintained.
Student Loans: Yearly student-loan originations grew from $53 billion to $120 billion between 2001 and 2012.

With very few exceptions, most colleges and universities rely on what the NCAA calls “allocated revenue.” This includes direct and indirect support from general funds, student fees, and government appropriations. In other words, most colleges subsidize their athletics programs, sometimes to startling degrees.

I suspect that you will find few poor students indulging in these country-club-style activities.
Polo anyone? Textbooks: Here is another significant cost not included in the tuition.
While the price of recreational books has dipped in the past 15 years, the price of textbooks has increased nearly twofold.

That has caused 65 percent of students to skip buying required texts at some point. Many textbooks are bundled with internet “access codes” that expire at the end of the semester. This forces students to buy books at retail prices at campus bookstores that are worthless in the resale market. Compensation: Presidents lead the league.

While schools might pay $250,000 for a famous professor, top coaches make millions.
The top dog (Nick Saban, football coach at Alabama) makes $11-plus million not counting outside income.
Soak the Rich: According to Adam Davidson, “A school that charges $50,000 is able to offer a huge range of prices to different students.

David Feldman, economics professor at the College of William & Mary, tells us that “A college’s sticker price is set by its wealthiest students’ ability to pay.” Conclusion If only students could boycott colleges to keep costs in line. College presidents, trustees, and politicians should feel some shame as they are the leaders in this cash grab.

We all need to raise our voices and tell our leaders to stop this madness.
If New York state can cap taxes for public schools at 2 percent, why can’t we expect colleges to do the same? References: American Council President’s Study 2017.
Myth: College Sports Are a Cash Cow, American Council on Education, available online at http://bit.ly/2WQ9zTU.

Clark, Kim.
College Board Says Tuition Rose Faster Than Inflation Again This Year, Money Magazine Online, retrieved November 4, 2015 at http://bit.ly/2WGSGeu,
Jaschik, Scott.
Are Prospective Students About to Disappear? Inside Higher Ed, January 8, 2018, available online at http://bit.ly/2I2PzKw.
Awasaki, Guy (2019) Wise Guy, Portfolio/Penguin: New York, NY.

The Scholarship System.
The Real Reason Why College Costs Are So High and What You Can Do About It, April 5, 2019 available online at http://bit.ly/2WQWDNR, TruBirch.
The Astonishing Increase In The Price Of Textbooks Since 2004, Visualized, Digg, March 9, 2019 available online at http://bit.ly/2EXb9NO,

Why do you think tuition fee has increased significantly in the past decade?

Cuts to higher education funding – Lackluster state funding is a major reason for rising college costs. From 2008 to 2018, the average tuition at four-year public colleges increased in all 50 states, On average, tuition at these schools has increased by 37%, and net costs (including factors like scholarships and grants) have increased by 24%, according to a 2019 report from the Center on Budget and Policy Priorities.

The CBPP report analyzes state funding for higher education and published in-state public college costs from the 2008 school year to the 2018 school year.
Researchers Michael Mitchell, Michael Leachman and Matt Saenz found that funding for higher education has not rebounded to pre-recession levels in most states, and that college costs are rising as a result.

From the 2008 school year to the 2018 school year, 41 states spent less per student, after adjusting for inflation. During that time period, states spent an average of 13% less per student — about $1,220. “It really does start to beg the question of what constitutes public higher education,” Michael Mitchell, lead author of the report and senior director and counselor of Equity and Inclusion at the CBPP told CNBC Make It,

“Nearly every state has shifted the responsibility of funding higher education from the state to students over the last 25 years, with the most drastic shift occurring in the past decade.” Several of the states with the biggest drops in per-student spending have seen significant tuition increases. In Louisiana, for instance, published tuition at public four-year colleges and universities has doubled since the 2008 school year.

In Alabama and Arizona, tuition at public colleges and universities is up by more than 60%. Per-student funding for higher education has increased in nine states since the Great Recession — New York, Montana, California, Alaska, Wisconsin, Hawaii, Wyoming, North Dakota and Illinois — but average tuition at public universities has still increased in all 50 states.
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Grady A. Lowry