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OK, So Why is College So Expensive?

Let's take a look at the realities and reasons behind the explosion of tuition costs.

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The question of why college is so expensive is a popular one. A Google search reveals that many people are asking this question. The fact that so many people do not have a clear answer reveals a lack of transparency into actual college costs, as well as how they are composed. So let's dig into some of the reasons that "experts" say is making college so expensive and evermore increasingly so.

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An awesome interactive report by CNBC based on the Delta Cost Project research shows the composition of college revenues and costs (highly recommended - see images above).

Too Many Highly-Paid Administrators?

According to a The New York Times article:

  • The total number of administrators increased from 3,800 to 12,183 from 1975 to 2008 in the C.S.U. system
  • During the same period, full-time faculty members increased from 11,614 to 12,019
  • Salaries for professors are actually barely higher than they were in 1970. 
  • In 1970, 78% of professors were full-time, now around 50% of them are full-time, the rest are lower-paid part-time employees

A 2009 US News report similar findings:

  • Public universities spent almost $4,000 per student per year on administration, support, and maintenance in 2006, up more than 13 percent, in real terms over 1995
  • $1,200 a year was spent on services such as counseling, which was up 23 percent
  • The $8,700 a year spent on classroom instruction for each student was up about 9 percent

Is Financial Aid Driving Up Prices?

The New York Federal Reserve looked at the correlation between Pell grants and tuition hikes, and found that (as reported by Forbes): 

  • For every $1.00 increase in Pell grants, tuition increased $0.55, saving students only $0.45
  • For subsidized loans, tuition increased $0.70 for every $1.00 in loans, saving students only $0.30.
  • Because only 60% of students take out subsidized student loans, the average student benefit is only $0.18 (60%*$0.30). 
  • Colleges charge the higher tuition to everyone, meaning they capture the additional $0.55 "Pell charge" and the additional $0.70 "unsubsidized loan charge" from all students. Colleges are gaining 4X the benefit compared to students!

An article by The Atlantic both disputes these findings and presents studies that are in agreement, arguing that the reasons people attend different colleges are so different that tuition hikes cannot be directly attributed to financial aid: 

  • At for-profit schools where loans are available, tuition is 75% higher that for-profit schools that were not eligible (possibly also caused by lack of accreditation?)
  • A 2001 study found no association between availability of financial aid and tuition levels/increases 

Is Demand Too High?

An NPR article interviews experts who argue that:

  • Colleges now compete globally for talented students, so they must offer more expensive services, despite the fact that demand has increased across the board
  • Tuition to UC Berkeley has increased 2000% since the 1970s, from about $700 to $15,000 per year
  • Public colleges, which educate 80% of students, have seen "dramatic increases" in tuition
  • Private colleges, which rely less on subsidies have also seen increases, but not quite as large
  • Today Pell grants cover about 33% of tuition. In 1980, they covered 50%, in 1970 it was more than 70%

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Analysis from the Delta Cost Project research:

Public College Spending

Public College Revenues
Private College Spending
Private College Revenues
Subsidy Inequality
The Results: What we see today - students and their families are deeper in debt to pay for the costs.

What is a provocation or insight that might inspire others during this challenge?

Different types of colleges are raising tuition for different reasons and with different effects. How can we address the factors that are increasing costs for vulnerable students and help students meet their underlying objectives for attending college in the first place?


Join the conversation:

Photo of Justin Bean

Just saw this video too that points to misguided priorities. Most colleges spend way more on athletics than education. 82% of these colleges are losing an average of $11 million annually on these sports programs and finance them with increasing tuition and taxpayer money, while they cut other student services and professor pay:

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