Tuesday, September 27, 2022

Why Is College Tuition So High

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Measuring Price Change In The Cpi: College Tuition And Fixed Fees

Why College Is So Expensive In America

College tuition and fixed fees, a component of the tuition, other school fees, and childcare index, is included in the education and communication major group of the Consumer Price Index . Both the tuition, other school fees, and childcare index and the college tuition and fees index are published monthly at the U.S. level. The education and communication index is published for all published areas on each area’s publication cycle.

Colleges Are Expanding Their Offerings

As entry-level jobs increasingly require undergraduate degrees, colleges are competing with each other and, as a result, are making changes on campus to increase the value of the student experience.

“That means hiring more faculty, building more dorms, making other types of capital and technological improvements,” Helhoski explained. “These are very real costs that colleges are taking on, and unfortunately, they put more responsibility on the students to meet those costs.”

Why College Tuition Keeps Rising

  • “This impact is especially true for low-income students,” said Michael Mitchell, lead author of the report.

A college education is now the second-largest expense an individual is likely to make in a lifetime right after purchasing a home.

It wasn’t always that way. Over the last decade, deep cuts in state funding for higher education have contributed to significant tuition increases and pushed more of the costs of college onto students, according to a new analysis by the Center on Budget and Policy Priorities, a nonpartisan research group based in Washington, D.C.

When that funding goes down it puts pressure on schools with limited options they can cut campus budgets, admit more students who need less aid or raise tuition, saidMichael Mitchell, lead author of the report and the senior director of equity and inclusion at CBPP.

Tuition has historically risen about 3% a year, according to the College Board. During the Great Recession, declining public funds caused tuition to skyrocket. At private four-year schools, average tuition and fees rose 26% over the last decade. Tuition plus fees at four-year public schools, which were harder hit, jumped 35% over the same period.

In some states, such as Louisiana and Arizona, tuition has more than doubled.

Meanwhile, the cost of attending a four-year public college or university has grown significantly faster than income over the same time period.

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Where Did The Student Loan Crisis Originate

Baby boomers were once able to pay for college with money they made from summer jobs. And for many middle-class families that had students starting college more than 30 years ago, parents were able to step in and help their kids pay for college.

Over the next few decades, public funding for higher education was massacred. These ever-increasing cuts forced colleges and universities to raise tuition more each, which in turn forced millennials to take on crushing educational loans, and we all know how that turned out.

This is the story college administrators like to tell when theyâre asked to explain why, over the past 35 years, college tuition at public universities has nearly quadrupled, to over $9000 per semester in 2014. It is a story that makes you wonder, âIs it really true?â It may in fact actually be the opposite of the truth.

Total Cost Increases: Private Colleges Vs Public Colleges

Why is college tuition so high?

Finally, well take a look at how the average costs of private schools have compared to the average costs of public schools over the past four decades. Although theyve both risen at rates faster than that of inflation, you might notice that theres a big difference in the costs between public and private schools:

Average Tuition & Fees + Room & Board Costs, 1975-2016

Overall, we can see that average education costs have risen pretty rapidly.

For public schools – The average total cost went from $7,833 in 1975 to $19,548 in 2015. Thats a 250% increase over four decades.

For private schools – The average total cost went from $16,213 in 1975 to $43,921 in 2015. Thats a 271% increase over four decades.

Your next question, naturally, might be why weve seen such a rapid increase in the cost of a college education in the US over the past 40 years. This isnt an easy question to answer, but well address all possible explanations for the rising cost of college in the next section.

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College Administrator Salaries Have Risenbig Time

Administrative bloat is cited across several sources as one of the main reasons for college cost increases. I thought the following statistics from this US News article were very interesting:

  • From 1978 -2014, the amount of administration level jobs at universities increased by 369 percent, which outpaced non-tenure track full-time and part-time positions respectively at 259 and 286 percent. Tenure track positions rose just 19 percent over the same time period.
  • From 2000-2010, median administration salaries rose 39 percent.

There could be a range of reasons for this, but much like the government or large corporations, there is probably a fair amount of bureaucracy excess at the top level of public and private universities.

The Single Most Important Factor Increasing College Tuition

But according to Adam Davidson in New York Times Magazine, he said the single most important factor behind the rise in tuition is that high tuition allows colleges to âshapeâ their student bodies. What does this mean exactly? In essence, the higher the tuition cost, the easier it is for universities to recruit the exact type of students they want by offering them college tuition discounts.

Ah, now weâre getting somewhere. Itâs about pricing strategy! That sounds like a sales trick thatâs as old as time itself. Tricks that used car salesman use on unsuspecting buyers. Kevin Crockett a consultant with Ruffalo Noel Levitz, told The Times Magazine âIâve got to have enough room under the top-line sticker price.â

Adam Davidson goes on to say: âA school that charges $50,000 is able to offer a huge range of inducements to different sorts of students. Some could pay $10,000, others $30,000 or $40,000. Only a handful can pay the full price.â A college is able to then recruit a diverse set of students with competitive test scores and accomplishments. Itâs all about the math and law of probability.

This, of course, explains primarily the reason for tuition increases at private colleges that donât get any state funding. At public universities, there are additional factors for college tuition increases, such as students, rather than state governments, absorbing more college costs.

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How Can You Make College Affordable

Although college is expensive, there are ways to help you make the costs a bit manageable.

  • Go to an in-state public university. Its because its average tuition cost for each student is $10,560 . Its much lower than the $27,020 that you need to pay per year if you attend an out-of-state public university.
  • Attend a community college. Starting out at a community college is one of the cheapest ways to a bachelors degree. The average tuition fee at community colleges for one year is $3,770.
  • File your Free Application for Student Aid ahead of time for financial aid even if youre not sure if youre qualified or not. You may be eligible for need-based programs such as Pell Grants or state-based college grants.
  • Apply for scholarships. You may find college scholarship programs that are merit-based, which means you need to meet or exceed a set of standards provided by the provider of the scholarship grant.
  • Get a student loan. You have several borrowing options if you need money to cover your college expenses. There are different types of student loans. These are direct subsidized loans, direct unsubsidized loans, and Direct PLUS loans. There are private student loans, too. These are issued by banks or other financial institutions.
  • Get a part-time job. If youre looking for ways to supplement your budget for college, then getting a part-time job like offering tutorial services can help.

Why Are College Costs So High

Why is College So Expensive?

If you have been touring college campuses you have likely experienced sticker shock when you hear the rates for tuition and fees, room and board during the information sessions. Even the price of textbooks will make you wince. If you went to college yourself, youre bound to wonder why the college costs have gone up faster than the costs of a house, a car, even the price of gas.

Its very easy to place blame for high college costs on the salaries of the presidents of the schools, the faculty and the football coach. But even if your school paid presidents little more than full-time professors, which many were before they moved into administration, and paid football coaches the same as academics with the same number of years of experience, that would not get around to cutting the more serious college costs.

College cost drivers include:

+ Retirement benefits. This is becoming a particularly serious problem at public universities, since they have more former faculty members who opted for retirement than the private schools. While they often participate in TIAA-CREF, a privately managed retirement plan, former faculty members are in public employee retirement programs. These former academics retired with higher salaries than, for example, policemen or firemen, so the costs of maintaining their retirement are extremely expensive.

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So What Can Students And Families Do

RESPs are arguably the most powerful lifeline available to Canadians hoping to avoid or minimize student debt. Families can contribute up to $50,000 per child, with the government pitching in up to $500 a year per child via the CESG and an additional $2,000 per child through the CLB.

Not surprisingly, RESP take-up has soared in tandem with tuition costs. In 1999, only 16 per cent of Canadian households with children had an RESP. Today, that share stands at 51 per cent, according to RBC. Still, that means almost half of eligible families arent taking advantage of RESP, which can be used to fund not university but a variety of post-secondary diplomas.

READ MORE: Taking money out of an RESP? Beware of the taxman

And RESPs arent much use to families who cant afford to set money aside for education, noted Parisa Mahboubi, senior policy analyst at the C.D. Howe Institute.

Grants are scholarships, of course, come with no payback or initial investment obligations, but they do require research, initiative and the ability to stomach financial uncertainty.

This funding is not automatic individuals need to apply, Mahboubi said, adding that knowledge gaps can hold back students in need.

The proliferation of government student-aid options has created a bureaucratic maze that can be difficult to navigate, said Shaker.

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Working part-time and summer jobs help lower costs but are hardly a solution.

Prices Have Soared In The 21st Century

There has never been a time when the cost of college wasnt rising. The Atlantic dug up a New York Times editorial from 1875 where the author griped that the cost of a single year of college could have paid for all four years a generation before.

More recently, the average cost of tuition and fees, plus room and board for private nonprofit four-year colleges grew by 25% in the 1990s, according to Guide2Research but the real damage was done in the 21st century.

A long-term study by U.S. News and World Report tracked two decades of tuition increases at hundreds of universities. It found that between 2001-2021:

  • Private school tuition rose from $16,987 to $41,411
  • Out-of-state tuition rose from $10,101 to $26,809
  • In-state tuition rose from $3,583 to $11,171

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Why Is College So Expensive Rising College Costs Explained

If youre like the average student, youre probably bemoaning the ever-rising cost of college. School seems almost impossibly expensive, and yet every year sticker prices tend to go up.

You know that getting a degree is important for your future career prospects, and you understand that you can apply for financial aid, but you just dont get how schools can set these sky-high prices. Did college tuition always cost so much? And if not, why has it risen to its current rate?

Ill answer these questions and more in the following sections, which address:

  • Current college expenses & cost breakdowns
  • Historical trends of tuition & fee expenses in the US
  • Explanations for these rapid cost increases
  • What you actually pay for school, and how thats different from the sticker price
  • Tips & strategies for keeping your costs down

Read on to learn more about why college is so expensive, and what you can do to afford it.

Colleges Need To Pay More Professors

The Real Reasons Why College Tuition is So High and What ...

Just as it costs money to learn, it costs money to pay teachers. Higher education is a labor-intensive industry, and productivity gains come slowly, Hartle said.

“The primary mechanism for delivering higher education at most institutions are highly educated people,” he said. “Acquiring and recruiting highly educated faculty and staff costs money, especially in jobs with significant demand outside academia.”

Hartle said the sorts of things that could lower these costs â such as larger classes, more adjunct faculty and fewer full-time professors, shorter hours, and fewer books in the library â were immensely unpopular with students, parents, and the public.

“Colleges spend much of their money on staff and compensation, so they have been experiencing an increasing cost of health insurance and other benefits,” Ma said, adding that while university tuition allocations vary by institution, most use a large percentage of tuition to pay professors’ salaries.

Vedder believes the percentage of university budgets used for instruction has fallen over the past 50 years.

“A typical university around 1970 would have allocated 40% directly for instruction, mostly professor salaries,” he said. “Nowadays, it’s more like 30%.”

With more part-time faculty members, universities can dole out lower wages and benefits, saving money for noninstructional full-time roles and a smaller group of tenured faculty, whom they can try to attract with higher salaries.

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Us Colleges Have Extravagant Facilities

No country spends more than the U.S. on student-welfare services what OECD refers to as ancillary services such as healthcare, meals, housing and transportation. In fact, the U.S. spends more than three times what the average developed country spends on ancillary services.

Features like picturesque academic greens, expansive academic facilities, and posh study spaces all cost money to build and maintain, and those costs are also passed along to the student, Ollenberg said.

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Public Funding Cant Keep Up

Another theory suggests that college tuition fees have been pushed up because state funding simply cant keep up with all the students that have been enrolling. In turn, they have to cut down on their support for higher education, which leaves colleges with no choice but to replace that lost revenue with increases in tuition fees, paid by the students themselves.

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Need College Planning And Related Advice

Finding the right college at a reasonable cost for your children or grandchildren may be overwhelming. Luckily, a whole cottage industry of college planning consultants has emerged. Check out college planning sites such as College Planning Consultants to learn more.

What do you think about rising college tuition? Is college worth the cost?

Fewer Kids Are Going To College Because They Say It Costs Too Much

Why is college so expensive?
  • A growing number of would-be undergraduates are opting out of college.
  • The pandemic has accelerated the problem of affordability.

College dreams are not what they used to be.

Up until this year, high school senior Jason Neuharth, 18, was set on attending a technical school in his home state of Minnesota.

“I was adamant on going to college this was going to be my future,” he said.

But the last 12 months of largely staying home and attending school in person only a few days a week left Neuharth with lots of time to reconsider, he said.

“I grew up with not a lot of money and that was a fear of mine the money,” he said. “I would not be able to feasibly pay for college.”

Instead, Neuharth enlisted in the National Guard with an eight-year commitment. “This second option, this get-out-of-jail-free card, which was the military, seemed like a no-brainer.”

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A year into the coronavirus crisis, many high school seniors have dramatically changed their expectations about the future.

A recent survey of high school students found that the likelihood of attending a four-year school sank nearly 20% in the last eight months down to 53%, from 71%, according to ECMC Group, a nonprofit aimed at helping student borrowers.

High schoolers are putting more emphasis on career training and post-college employment, the report found.

There is going to be a reckoning here.

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State Funding Can’t Keep Up With Enrollment

Terry Hartle, a senior vice president of the American Council on Education, boils down the increasing cost of college to this: Many state governments have cut operating support for higher education, for at least a generation, and let colleges replace the lost revenue with tuition hikes.

“States provide less, and students and parents pay more,” Hartle told Business Insider. “Studies have shown that when state support is level or increasing, tuition is flat. But when state support declines, tuition goes up. Roughly 80% of America’s students attend public colleges, so it’s not an exaggeration to say that the biggest determinate of the price they will pay for their education is the budgetary decisions made by state governments.”

The College Board’s report underscores Hartle’s theory. It found that prices at public colleges and universities rise faster when government funding per student sees little growth or is slowing down. In the 2015-16 school year, appropriations â money given to a school by the government â per full-time enrolled student were 11% lower than 10 years before, when adjusted for inflation.

“For public institutions, state appropriations make up a significant portion of the college’s revenue, and in recent years, the state appropriations have not been able to keep pace with enrollment,” Jennifer Ma, a senior policy research scientist at the College Board, told Business Insider.

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