Understanding the Rise in College Tuition

"I knew college tuition had gone up a lot, but I didn’t realize it was this expensive!"

How many times have I heard this from parents who have come to me for college counseling and from friends who know I do research on college access and affordability?

Facts About Tuition Increases

The fact of the matter is that the price of college has indeed increased quite a bit, and if you’re just beginning to get serious about the college search process — whether you’re a student or a parent — you’re probably stunned by the sticker price. Here are some facts behind the shock you may be experiencing about today’s college tuition:

  • The average annual tuition for a four-year public college was $512 in 1974; it was $9,139 in 2014, or a change of 1,685 percent!
  • The story is similar for four-year private colleges; average tuition was $2,130 in 1974 and $31,231 forty years later. This equals a 1,366 percent increase.
  • A little context: Inflation increased 382 percent in this same period.

In a short brief I wrote a few years ago, I pointed out that my annual undergraduate tuition at a private college in 1969 was $1,980; in 2012, the rate had soared to $42,980. If that college’s tuition had increased at the rate of inflation, it would have been $11,921 in 2010. That certainly puts the situation in perspective!

Comparison of Public and Private Institutions

Public Colleges

Even looking at a more recent time span, tuition at public colleges and universities — which enroll more than 70 percent of all undergraduates — increased at much higher rates after the 2008 recession. Public colleges in some states were especially hard-hit. In Arizona, tuition at public four-year institutions rose 72 percent between 2008 and 2014; in Georgia, the increase was 68 percent in this same time period; and in Washington State, tuition at public universities grew by 56 percent. All of these increases are adjusted for inflation, meaning that these growing tuition figures exceeded inflation by very large measures.

Between 2008 and 2014, public colleges and universities in every state across the country have experienced tuition increases significantly above inflation, and with the exception of five states, the increases were at least in the double digits. Put another way, the tuition increases exceeded $1000 in all but 10 states!

Private Colleges

Private university tuitions also rose between 2008 and 2014, from an average of $24,818 to $31,231, or 26 percent. In terms of a percentage difference, private institutions did not increase as much as public colleges; but in actual dollars, private tuition growth was higher. It is also true that private tuition is still considerably higher than public tuition for in-state students.

Changes in Family Income

So tuition increases aren’t a figment of anyone’s imagination. Tuitions have risen, and they have risen considerably faster than other goods and services we typically pay for, such as housing, cars, and even medical care.

Moreover, tuitions have increased much faster than family incomes. Between 1984 and 2013, median family income only rose by eight percent in inflation-adjusted dollars, a paltry increase in comparison to tuition growth. But the issue is even more complicated because going to college is far more important today than it was 10 or 20 or 30 years ago; students across the income spectrum understand this and are enrolling in college to ensure they’ll be able to support themselves in the current and emerging economies.

For lower-income families, paying for college is truly a challenge, as tuition alone — without even considering room and board, fees, books, and other education-related expenses — can be equivalent to a sizable share of a family’s income.

Everyone wants to know why tuitions have gone up so much. And of course, it’s complicated! There is a lot of finger-pointing, but for now, I want to address a principal reason for the most recent tuition increases.

Major Decline in State Appropriations

In the public sector, a major source of revenue for higher education has traditionally been state support. The 2008 recession resulted in dramatic declines in state funding for higher education across the board. Although recently states have begun to increase their support for colleges and universities, state appropriations for higher education are far from pre-2008 levels. Indeed, in all but two states — Alaska and North Dakota — state spending for higher education in 2014 was still well below 2008 levels. And in 21 states, spending in 2014, as compared to spending in 2008, had declined more than 25 percent.

Why did higher education take such a hit? Unlike other services that states fund (e.g., K–12 education), corrections, Medicaid, transportation, or public assistance), there is another source of revenue for colleges and universities: tuition! With such dramatic cuts in state support, colleges and universities needed either to find revenue from other sources (such as tuition), cut spending, or do a bit of both. Tuitions soared after 2008, and the states with the largest budget cuts tended to be those in which tuitions increased the most.

Endowment Declines

What about private universities? Although private institutions don’t typically receive state funding, the 2008 recession still took its toll: Endowments plummeted. Not all private colleges and universities have large endowments, but many do (or at least ones large enough to support some of their operations). With the stock market plunges associated with the 2008 recession, some private institutions were also looking for other revenue sources, and they raised tuition accordingly.

Ending on a Positive Note

The good news is that most families don’t pay the so-called sticker price, or the high tuition colleges post. Actually, more than 80 percent of full-time, first-year students in 2011 received some type of financial aid. And this 80 percent figure includes large numbers of students who do not qualify for need-based financial aid. There are numerous strategies for obtaining financial aid and cutting the cost of college in other ways; I’ll be addressing those in an upcoming article.

Read Part Two: Debunking Myths to gain additional insights into the rise in college tuition.

Learn more about how Noodle’s report cards on college profiles can help you in your search for the right school.

Sources:

Inflation Adjustment for Trends in College Pricing. (n.d.). Retrieved from College Board Trends in Higher Education.

Kirshstein, R. (2012, December). Not Your Mother's College Affordability Crisis. Retrieved from Delta Cost Project.

(n.d.). Retrieved from College Board Trends in Higher Education.

(n.d.). Retrieved from National Center for Education Statistics.

(n.d.). Retrieved from National Center for Education Statistics.

(n.d.). Retrieved from United States Census Bureau.

Tuition and Fees by Sector and State over Time. (n.d.). Retrieved from College Board Trends in Higher Education.

Tuition and Fees and Room and Board over Time. (n.d.). Retrieved from College Board Trends in Higher Education.