Why Did College Become So Expensive? The Key Factors
Explore the intricate economic and policy shifts that have made higher education increasingly costly for students and families.
College tuition costs have increased significantly over recent decades, becoming a widely recognized societal concern. This upward trend in educational expenses has placed a growing financial burden on students and families across the nation.
Declining Public Investment
A significant contributor to rising college costs is the reduction in state and federal funding for public colleges and universities. Historically, public institutions received substantial government appropriations, which subsidized a large portion of their operating expenses. This trend has shifted, leading to a greater reliance on tuition revenue.
State funding for higher education has not kept pace with the rising costs of institutions or growing student enrollment. This reduction in per-student funding has directly translated into higher tuition fees, as colleges seek to cover budget shortfalls.
When states reduce their financial contributions, public universities often respond by increasing tuition to maintain their operations and educational quality. Research indicates that for every $1,000 decrease in state funding per student, there is, on average, a $257 increase in college costs to students. This highlights how financial responsibility has shifted from state governments to individual students and their families.
Rising Demand for Higher Education
The increasing societal emphasis on obtaining a college degree has played a substantial role in driving up educational expenses. A college education has become perceived as a prerequisite for career success and upward mobility, fueling a sustained increase in individuals seeking higher education.
College enrollment increased significantly between 1970 and 2010. This surge in demand has created a market dynamic where institutions can command higher prices. When demand outstrips the fixed supply of educational institutions, the cost of attendance tends to rise.
The overall long-term trend has been one of increased participation in higher education. The growing number of students pursuing degrees has allowed universities to raise tuition without facing significant market resistance. This demand-side pressure contributes to the overall escalation of college costs.
Institutional Spending Trends
Colleges and universities have also significantly increased their own expenditures, contributing to the escalation of tuition. This includes a notable growth in administrative staff and salaries, an expansion of student services, and substantial investments in new facilities and amenities. From 2010 to 2018, spending on student services grew by 29% and administrative spending increased by 19%, both outpacing the growth in instructional spending.
The growth in administrative roles has been particularly pronounced. Between 1976 and 2018, the number of full-time administrators at colleges and universities increased by 164%, and other professional staff by 452%. These increases reflect a growing bureaucracy within institutions, with some universities having significantly more non-faculty employees than faculty. Such expansions in non-instructional personnel add to the overall operational costs that are often passed on to students through tuition.
Furthermore, institutions have engaged in what is sometimes termed an “amenities arms race,” investing heavily in state-of-the-art facilities, modern dormitories, recreational centers, and comprehensive student support services. While these investments aim to attract and retain students, they come with substantial price tags. The costs associated with constructing, maintaining, and staffing these enhanced facilities and services contribute directly to higher tuition rates.
Student Loan Expansion
The increased availability and accessibility of student loans have played a significant role in enabling the rise of college costs. As more loan funds became available, students gained greater purchasing power, which, in turn, allowed institutions to increase tuition without a corresponding drop in enrollment. This dynamic creates a feedback loop where increased loan availability can incentivize colleges to raise prices.
Federal student loan programs, which originated with the National Defense Education Act of 1958, have expanded considerably over the decades. The introduction of programs like the Federal Family Education Loan (FFEL) program and the removal of income requirements for certain loans have broadened access to borrowing. This expansion in federal lending capacity has been a major factor in supporting rising tuition levels.
The private student loan market has also experienced substantial growth, with outstanding balances approaching $140 billion. These loans, often carrying higher interest rates and fewer consumer protections than federal loans, further augment students’ ability to pay higher prices.
The combined effect of robust federal and private loan markets means that students can finance increasingly expensive degrees, diminishing the market pressure on colleges to control costs. Research suggests that a significant portion of increased borrowing capacity is passed on to students in the form of higher tuition.