The Real Reasons Why College Tuition is So High and What you Can Do About it

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Where Did the Student Loan Debt Crisis Originate?

Many in the older generation were once able to pay for college with the money they made from summer jobs or working part-time while pursuing a college education. And for many middle-class families that had students starting college more than 30 years ago, parents were able to step in and help their kids pay for college.

The rising costs have made attending college increasingly difficult for many students, leading to a significant burden of student loan debt.

Over the next few decades, state and federal funding for higher education was massacred. These ever-increasing cuts forced colleges and universities to raise tuition more, which in turn forced millennials to take on crushing educational loans that significantly harmed their financial stability.

This is the story college administrators like to tell when they’re asked to explain why, over the past 30 years, college tuition at public universities has nearly quadrupled to over $9,750 per year in 2024. For private four-year institutions, tuition and fees experienced a 361% increase, hitting $41,540 per year. It is a story that makes nearly every student and parent wonder, “Is it really true?” It may, in fact, actually be the opposite of the truth.

Is it True?

In a recent National Public Radio series on the cost of a college degree, Sandy Baum of the Urban Institute told NPR, “It’s not that colleges are spending more money to educate students. It’s that they have to get that money from someplace to replace their lost state funding — and that’s from tuition and fees from students and families.”

In fact, public investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s. This kind of spending has increased at a much faster rate than government spending in general.

While federal student loans are a significant factor, private student loans also contribute to the rising debt burden on students. This likely stems from the explosion of college tuition since the 1970s, but even so, it’s still tough to explain why college tuition has skyrocketed. In fact, the growth in tuition likely stems from a variety of factors. For example, a paper from the Federal Reserve Bank of New York suggested that colleges were raising their sticker prices because the federal government was giving students more loans.

The Single Most Important Factor Increasing College Tuition

Adam Davidson in New York Times Magazine said the single most important factor behind the rise in tuition is that high tuition allows colleges to “shape” their student bodies. What does this mean exactly? In essence, the higher the tuition cost, the easier it is for universities to recruit the exact type of students they want by offering them college tuition discounts.

Increased investment in student services, such as career counseling and mental health support, has also driven up tuition costs.

Ah, now we’re getting somewhere. It’s about pricing strategy to attract students! That sounds like a sales trick that’s as old as time itself. Tricks that used car salesman use on unsuspecting buyers, but they’re directed at prospective students and their parents.

Kevin Crockett, a consultant with Ruffalo Noel Levitz, told The Times Magazine, “I’ve got to have enough room under the top-line sticker price.”

Adam Davidson goes on to say: “A school that charges $50,000 is able to offer a huge range of inducements to different sorts of students. Some could pay $10,000, others $30,000 or $40,000. Only a handful can pay the full price.” A college is able to then recruit a diverse set of students with competitive test scores and accomplishments. It’s all about the math and law of probability.

This, of course, explains primarily the reason for tuition increases at private universities and colleges that don’t get any state funding. At public institutions, there are additional factors for college tuition increases, such as students rather than state governments absorbing more college costs.

But What About the Future of College Tuition Costs?

Today’s college prices will seem cheap when compared to the price hikes of tomorrow. Still, they’re rising at alarming rates, far faster than inflation. As students and parents probably have noticed, in-state public schools have also recently increased tuition costs–a lot! As an example, the California State University’s board of trustees approved a 34% tuition hike across five years, with an initial 6% increase occurring during the 2023-2024 school year and additional 6% increases occurring annually through the 2027-2028 academic year.

Despite the rising tuition, fees, and other costs, obtaining a bachelor’s degree seemingly remains crucial for higher earnings and better job opportunities. Even at low-tuition schools, college costs are soaring out of control, especially if students add an extra year to make the workload manageable or complete requirements after changing majors.

Critics blame high prices on overpaid professors or unnecessary expenses. But is that the real reason why college tuition is getting so high? Lobbyists tend to blame budget cuts from the state legislature. But a new study tells a different story–how easy it is to get federal student aid (loans!). They make it very easy–almost too easy.

Federal student aid accounts for most of the college tuition increases between 1987 and 2010, according to the National Bureau of Economic Research. It’s simple. The more money students can borrow, the more colleges are able to charge. They are playing off the government’s ability to offer student loans to anyone who qualifies. So, who can qualify for federal student loans? Every college student in the U.S.!

Over the last few decades, the amount of aid available to students has increased dramatically. Subsidized loans expanded greatly, and guess what else–unsubsidized loans also came into existence. But looking at the big picture, does that money offset the costs to students? Researchers say no, absolutely not. It had the reverse effect.

Instead, colleges increased tuition even more because they knew federal financial aid could cover the difference. With this kind of setup, college students and their families are at the mercy of the federal government and colleges everywhere. Student aid may cover more of the tuition, but if the aid wasn’t available, tuition might not have gone up in the first place.

Make Some Noise

While there are many more methods students can use to reduce college tuition personally, the elephant in the room needs to be addressed. Parents and students need to make some real noise to get politicians to notice this horrible crisis and finally do something about it. As they say, “The squeaky wheel gets the oil.”

Now before going further, The Scholarship System isn’t endorsing any political party or candidate. Instead, the goal is to show ideas presented by various politicians. No pitchforks, please!

President Joe Biden has put some effort into addressing the college cost crisis. He attempted to provide $20,000 in student loan debt relief for many students. Though that initial effort was ultimately blocked, other plans are in the works that could assist many students. Additionally, President Biden launched the SAVE plan for student loan repayment, which may make a significant impact.

Many politicians have floated the idea of doubling need-based federal college grants, as well as adjusting various lending rules. Senator Bernie Sanders has often proposed making community college tuition-free for all students, at times stating that all public colleges and universities should either be “tuition-free or debt-free for working families.” In New Jersey, the legislature is considering a bill that would cap tuition increases, limiting them to 2% annually.

Some creative ideas have also been presented over the years. Senator and previous presidential candidate Mark Rubio once stated he does not think tax money should support the current higher education system. He also said that universities raise fees too often and too quickly. “The higher ed cartel pushes skyrocketing tuition and degrees that don’t lead to jobs. Yesterday’s leaders want to raise taxes and dump more money into this broken system.”

Rubio’s presented a proposal where students apply for Student Investment Plans. These plans would link students to private investors. In return for funding from investors, students would pay back part of their income to those investors for a set number of years. Unlike loans, students would not have to pay back the full amount that they borrowed from private investors. However, they would still have to pay a percentage of their income for the amount of time agreed.

Regretfully, many proposals to address the issue don’t move forward. Ultimately, the rising cost of college isn’t an easy problem to solve, and it all takes time and effort. Keep working on it, and keep on fighting the good fight. As a population, staying cohesive and unified to fix this massive problem is essential, as that improves everyone’s chances of finding a solution that gets us there, one way or another.