Why Is College Tuition in the US So Expensive?

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The American higher education system is a complex beast — it’s actually 50 different systems spread across every U.S. state. Within each system are three subsystems: private colleges, public colleges and for-profit colleges. 

And in America, higher education is as expensive as it is complicated.

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The U.S. spends more on college than every other developed nation but one, according to recent data from the Organization for Economic Cooperation and Development (OECD). In 2017, Americans spent nearly $30,000 per year per student. Only tiny Luxembourg spent more, but the government there covers the cost of college, as governments do in one-third of the developed world. In another third, tuition is very cheap.

In America, college is anything but cheap — and it’s gotten much more expensive over the last two decades. 

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Prices Have Soared in the 21st Century

There has never been a time when the cost of college wasn’t 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.

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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.

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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 

There’s No Inflation Like Tuition Inflation

As the study’s authors point out, those numbers do not account for inflation. But even so, tuition costs have dramatically outpaced normal increases in the cost of living. For context, the rate of consumer price index inflation was about 50% between August 2000 and August 2020. Tuition inflation, however, was:

  • 144% for private tuition
  • 165% for out-of-state tuition
  • 212% for in-state tuition

That’s just the average. According to Guide2Research, some extreme examples between the start of the century and 2015 include:

  • Northern New Mexico College raised its tuition rates by 358.7%
  • The University of Arizona raised its tuition rates by 228.9%
  • Arizona State University-Tempe raised its tuition rates by 215.1%
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In fact, tuition is in an inflationary category nearly all its own. According to the American Enterprise Institute, the cost of college tuition has increased more in the 21st century than all other goods and services except for hospital care — tuition inflation beat out other high costs like medical care, child care and housing.

So, Why Is College So Expensive in America?

The very complicated question about why tuition has gotten so expensive boils down to the most basic economic principle: supply and demand.

“In general, rising costs of college can be largely attributed to an increase in demand by students to earn degrees,” said Ayden Berkey, co-founder of a college and scholarship resource platform called Access Scholarships. “Today’s society puts an immense amount of pressure on high school students to attend college, specifically emphasizing that the more prestigious the university you graduate from, the more success you will be met with later on.”

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Phil Ollenberg, a higher education leader, Ph.D. candidate, and industry expert with 15 years of experience in enrollment management, marketing and admissions at Bow Valley College, concurs.

“Demand for higher education has increased steadily over the past 50-60 years, with emerging professions requiring increasingly specialized training,” Ollenberg said. “That specialized training, whether coming from a university, a college, or a technical school, comes with expensive equipment and training facilities. It is no longer being facilitated on-the-job by employers like in generations past.”

The result of that dynamic is that college graduates now out-earn high school graduates by $1 million over the course of their careers, according to a study from the Manhattan Institute (MI). Those income aspirations can drive a blind pursuit of college based on what the study calls the “golden ticket” fallacy, which increases enrollment and therefore, cost.

“The subsequent result of increased enrollment is schools raising their costs so that they can increase staff numbers and meet faculty needs, improve services and amenities on campus, and in general, expand financial aid programs,” Berkey said.

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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Labor Costs at Colleges Are High

Fancy dining halls and game rooms are actually just a drop in the bucket. The OECD report shows that high-priced employees — university staffs are almost all college-educated themselves — gobble up much of the average college’s budget.

“Attracting those specialized faculty members means paying them competitive to what they could make in the private sector,” Ollenberg said. “All that adds up to additional costs to the student.”

Other contributing factors include:

  • Cuts to education: Many cash-strapped states have cut funding to public college systems, particularly in the wake of the 2008 recession. Many pivoted by focusing on wealthy out-of-state and foreign students who pay full tuition. The Atlantic cited Purdue University, which lost 4,300 in-state students in the 2010s but gained 5,300 outside students who pay triple the tuition.
  • On-campus culture: American students are much more likely to live away from home during college, which is far more expensive than living at home.
  • Nonteaching staff: Colleges employ legions of coaches and athletic staff, lawyers, admissions officers, maintenance staff, food-service workers, diversity liaisons and marketers.
  • Confusion and uncertainty: The MI study found that pricing is confusing and value is hard to ascertain, which makes comparison shopping difficult.

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Last updated: Aug. 9, 2021

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.
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