5 Reasons Why College in America Costs So Much

FT Contributor
Newspaper headline reading "Rising Tuition" lying atop a pile of money, next to a graduation cap
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If there is one thing that everyone can agree on, it’s that a college education is expensive. According to the College Board, the average annual tuition for a private institution is $32,410; for a public university, an out-of-state student can expect to pay around $23,000 per year. And that just covers tuition and fees. When you add in room and board, books, and other costs, the price tag for a college education can top out at well over $50,000 per year.

The high cost of a college education is the primary contributor to the colossal student debt in America (more than 44 million people have student loans, with an average balance of more than $37,000), and for many people, one of the largest expenses in their life. Even when a student — or their parents — has financially prepared for school and saved for it, the price tag is eye-popping. Although there is little argument about the benefits of college, the question remains: why is college so expensive?

Tuition Costs Are Rising

College used to be much more affordable. In fact, the College Board reports that between 1980 and 2018, the costs of college tuition increased by 213% at public universities, and 129% at private colleges, when you adjust for inflation. Not only that, but the cost of a college education has increased at a faster rate than wages, effectively making it even more expensive.

So why have tuition costs increased so much, especially when compared to the rest of the world? Economists point to several factors. For starters, the growth in the American economy has made everything more expensive, which is called inflation. The rising cost of college has gone unchecked in a growing economy, just like the cost of healthcare or the cost of a new car.

However, inflation and economic growth aren’t the only reasons college costs have doubled. The expectations of the American student also have an effect. Unlike college students in Europe and elsewhere, the majority of American students live on campus, and expect certain amenities. Colleges must invest in dormitories, dining halls, and other infrastructure to attract students, and those amenities cost money.

Offering students the services they expect — and that are necessary to a functioning university — requires hiring hundreds of non-teaching staff members. In fact, between 1993 and 2009, the number of administrative positions at colleges and universities increased by 60%. From librarians, security officers, and career counselors, to admissions representatives and financial aid officers, colleges have hundreds of people on their payrolls, driving up costs to students.

Demand for Higher Education

Another factor influencing the cost of college is demand. As the job market increasingly demands degrees from applicants, the number of people seeking degrees is going up as well. Analysis of reports from the Department of Labor indicates that the majority of jobs that have been created in the last decade have gone to people with a college degree. Since 2007, it’s become more difficult for anyone without a degree to find work, and many employers have even tightened their hiring requirements.

According to a CareerBuilder survey, 37% of companies are now requiring a bachelor’s degree for jobs that used to only require a high school diploma, while 27% now want candidates with a master’s degree when a bachelor’s used to be adequate.

Ultimately, the fact that it’s become all but impossible to land a good job without a college degree is driving more people to universities. Although the total number of people entering college has decreased slightly since its high in 2010 (19,904,000 in fall 2019 vs. 21,019,438 in fall 2010) the fact remains that the number of people going to college every year is higher than ever before — and when demand increases, so do costs.

Increases in Financial Aid

One of the ironies of college cost increases is that the very programs designed to make college affordable could actually be contributing to the costs going up.

Before the mid-1970s, financial aid for college was all but nonexistent. Students who wanted to go to school had to pay out of pocket, whether that meant relying on scholarships, their parents, saving money on their own, or working through school (or some combination thereof). Only the lowest-income students received any type of financial aid for school. In 1978, though, Congress passed the Middle Income Student Assistance Act, making student loans and Pell Grants more accessible to middle-class students.

As a result, more people began applying for financial aid, and some economists theorize that as this money became available, colleges and universities raised their rates to better position themselves to access it. In fact, researchers who have explored this hypothesis have found that for every dollar of new financial aid (whether from loans, grants, or other programs) tuition costs increase by as much as 65 cents.

Insufficient State Funding

Another irony of why college is so expensive is that while the demand for individuals with college degrees has increased, the amount of money earmarked to support institutions of higher education has decreased. And when the amount of government funding decreases, tuition increases, as schools shift the burden to students and their parents.

For public state universities in particular, money from the state represents a major chunk of revenues. But even private universities aren’t immune to the effects of reduced funding. According to the College Board, between 2001 and 2013 when schools saw significant cuts to funding, annual tuition increases of 5% or more were common.

However, in recent years, as funding has steadily increased, the overall net price of a college education has stabilized somewhat. Still, while the average price increases have decreased a bit over the last few years, government funding per student is still lower than it was in the 1980s, when adjusted for inflation.

A Lack of Faculty Members

Finally, it’s not only the increase in administrative staff contributing to inflated college prices. There’s also the teaching staff. Students are looking for a quality education, and in America, that means being taught by pedigreed professors with a long list of publications and terminal degrees, in classes with low student-teacher ratios. This expectation comes at a cost, as professors can demand higher salaries.

The American Association of University Professors reports that in 2018, the average full-time professor’s salary was $104,820. At some top-tier schools, the average salary was over $250,000 — and that’s before accounting for benefits like health insurance. It only makes sense, then, that schools charge students more.

Some schools have tried to curb the costs of instruction by relying on more part-time and adjunct faculty members, increasing class sizes, and cutting faculty hours. However, many of these methods are not well-received by students, who perceive them as reducing the value of their education. In order to meet the expectations of students, then, and provide the education and services they demand, tuition increases are necessary.


Understanding why education is so expensive is one thing, but it doesn’t really ease the sting of the bill. However, parents and students can make it easier on themselves when it comes to paying for college and managing student loans.

Begin by evaluating your school options; for instance, attending a less-expensive in-state university, or even a community college can make your money go further while still giving you the all-important degree. Be sure to fill out your financial aid applications early, and research the availability of scholarships and grants. The more “free” money you can get, the fewer student loans you’ll need — and the lower the ultimate cost of going to college.

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