There’s no question that compared to previous generations, colleges are charging today’s students more for higher education. Between 1980 and 2020, the average price of tuition, fees, and room and board for an undergraduate degree increased 169%, according to a recent report from the Georgetown University Center on Education and the Workforce.
But as a result of the Covid pandemic, there’s more to the story. Average college tuition and fees have stayed about the same since September 2019, according to the U.S. Bureau of Labor Statistics, even though inflation has led to rising prices for all other goods and services. Here’s what to know about the historical increase in college costs, and how recent trends have affected it.
How College Prices Ballooned Over 40 Years
In 1980, the price to attend a four-year college full-time was $10,231 annually—including tuition, fees, room and board, and adjusted for inflation—according to the National Center for Education Statistics. By 2019-20, the total price increased to $28,775. That’s a 180% increase.
College prices have soared across all institution types, but private nonprofit institutions continue to cost more than public colleges. A full-time student paid $48,965 at a private nonprofit college on average in 2019-20 compared to $21,035 at a public university.
Since 2019, however, the trend has slowed. In fact, from the academic year 2019-20 to 2021-22, average tuition, fees, and room and board dropped 0.2% at private nonprofit four-year schools, according to the College Board. From 2020-21 to 2021-22, prices dropped a further 1.7%. Costs at public four-year schools followed a similar pattern in the same timeframe.
It’s unclear if this is a short-term or long-term deceleration in price growth. But some reasons for the change include pandemic stimulus funding to postsecondary institutions, which helped them increase grant aid to students, and tuition freezes across several colleges in response to the economic impact of the pandemic.
Why Have College Prices Risen So Dramatically Over Time?
Even if college prices have stabilized for now, they’re still unmanageable for many students. More than half of bachelor’s degree recipients from public or private four-year colleges graduated with debt in 2020, and the average debt load was $28,400, according to the College Board.
How did prices rise so substantially? There is a range of possibilities, many of which researchers aren’t in agreement on. For example, increases in both federal student loan availability and administrative positions at colleges are widely debated as contributing factors. But data doesn’t conclusively show that these factors cause prices to rise in a significant way.
Here are some trends that have likely contributed to higher costs for colleges over time.
1. Colleges Provide More Student Support Services
Colleges have stepped in to fill many roles for students outside of educating them. This includes mental health support, which has become even more necessary as college students navigate the pandemic, plus help securing housing, food, transportation, child care and more. Academic advising is also important to help ensure students graduate on time or meet their transfer goals.
These supports can make a real difference in student outcomes. The City University of New York’s (CUNY) Accelerated Study in Associate Programs initiative, for example, has been shown to almost double graduation rates among community college students over three years, according to a report by social policy evaluation organization MDRC.
Adding these services requires hiring nonfaculty personnel to staff and manage them. Programs at community colleges that provide academic and personal guidance to students through individual advising can cost $1,000 to $5,700 per student annually, according to the Brookings Institution.
2. Changes in State and Local Funding
Aside from tuition payments, public institutions depend on funding from states and localities to operate. State and local funding made up 55% of public two-year college revenues and 44% of public four-year college revenues in 2018-19, according to the College Board.
The amount states and local governments give to colleges fluctuates depending on market conditions and tax revenues. Economic downturns like the Great Recession in 2008 led to funding cuts, and in 2020, average education appropriations per full-time equivalent student were still 6% lower overall than in 2008, according to a report from the State Higher Education Executive Officers Association (SHEEO).
When public colleges have less state and local funding, it’s more likely they’ll pass costs on to students in the form of tuition increases, according to a 2019 report from the Center on Budget and Policy Priorities. State and local support for colleges is on the upswing, however. As of 2020, average public higher education funding increased for eight years in a row, according to the SHEEO report, and 18 states have brought funding up to pre-2008 levels.
That’s good news for today’s students. When we look further back, though, we can see how state and local disinvestment in higher education funding has affected college costs overall. State and local funding per student for higher education dropped about 25% between 1988 and 2018, according to an analysis by Douglas A. Webber, an associate professor of economics at Temple University.
3. Overall Increase in Costs for Service Industries Like Education
One primary reason for the huge jump in college prices since 1980 is a concept called cost disease, argue Robert B. Archibald and David H. Feldman, economics professors at the College of William & Mary.
Unlike other areas of the economy, like manufacturing, it’s difficult to increase productivity in higher education while maintaining the same experience. New technology and improved methods can increase production at a steel mill, for example, but there’s not much innovation to introduce in a traditional 10-person literature seminar without sacrificing quality.
So while productivity gains in the overall economy keep the cost of producing goods from growing too fast, higher education and other services haven’t benefited from that productivity boost. That means it costs colleges more to produce an education, and that has led to higher prices for students.
Plus, it costs more to hire highly educated professors and administrators than it did in the past. Colleges are also likely to invest in the latest technology on campus, and in innovations in other areas that serve students, including career counseling, which raises costs.
How Should You Approach Rising College Costs?
It’s frustrating to see never-ending tuition inflation and feel powerless against it. But as an informed consumer, you can make smart choices to ensure that you don’t pay more than you can afford. You may choose to attend an in-state public college, for example, or to attend an affordable community college for two years and then transfer to a university to complete your degree.
No matter what type of school you plan to attend, use a net price calculator to determine how much you might actually pay at a certain school. You may find that you qualify for more financial aid than you expected. Also, make sure to fill out the Free Application for Federal Student Aid (FAFSA) to be eligible for grants, scholarships and low-cost federal student loans. That can make a significant difference in the amount you pay out of pocket.
More From Advisor
- How Much Is Law School?
- Student Loan Refinance Rates: March 21, 2022—Loan Rates Slip
- Private Student Loan Rates: March 21, 2022—Loan Rates Drop
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
