Education • OCT 25, 2024 Advertiser Disclosure

Why Tuition And Fees Are Still Rising Faster Than

Financial Aid in 2024

by Imed Bouchrika, Phd

Co-Founder and Chief Data Scientist

Attending college is costly. The tuition costs are staggering as well as the room and board fees
and the cost of transportation, fueled by today’s high inflation. As such, the amount of student
loan debt Americans have accumulated has ballooned—now nearly $1.6 trillion (Federal Reserve
Bank of New York, 2020). Recent data shows that higher education costs come as one of the
latest expenses individuals deal with. But it was not always this way.

In this article, we will see just how the cost of college kept rising over the decades and why
tuition increases every year even as financial aid lags behind. We will discuss the different reasons
that can provide more insight into why does the cost of college keep rising, what factors affect
the cost of matriculation, why it potentially causes students to drop out, and what can future
generations of students do to pursue their college degrees without accumulating
insurmountable student debt.

Why Tuitions Increase Every Year: Table of Contents

1. Cuts in State Funding

2. Demand for College Education

3. Stagnating Wages

4. How Administrative and Facility Costs Impact Tuition

5. How to Make College More Affordable

According to the latest Trends in College Pricing report of the College Board, the average
published (sticker) tuition and fees charges for full-time undergraduates at private nonprofit
four-year institutions is $37, 350 for SY 2020-21. This reflects an increase of 2.1% and a difference
of $770 compared to charges in 2018-19, which was $36,880.

For public four-year out-of-state institutions, the increase is 0.9% with an additional cost of $250
from $26, 770 to $27, 020. The increase in public four-year in-state schools is 1.1% with an extra
$120 from $10,440 to $10, 560; and public two-year in-district schools is 1.9% with an increase of
$70, from $3,700 to $3,770.

These tuition and fees increases are not only true for the recent two years. According to the
College Board, these charges have risen about 3% every year through the last decade. From 1990-
91 and 2020-21, the average published tuition and fees increased from $18, 560 to $37, 650 for
private nonprofit four-year institutions; from $3,800 to $10, 560 for public four-year institutions;
and from $1, 810 to $3, 770 for public two-year institutions (Ma, Pender, and Libassi, 2020).

The costs mentioned are only for tuition and fees. There are of course other expenses associated
with going to college, such as living expenses and budgets for school supplies. Altogether, you
can imagine why students’ accumulation of huge student loans and why the debate whether a
college degree is still worth it have become highly controversial issues.

Cuts in State Funding

Sure! Here’s the revised paragraph with the added keywords:

“Contrary to the popular notion that higher education institutions are price gouging students
and their families, a study done by the Center on Budget and Policy Priorities (CBPP) found out
that deep cuts to state funding in the last decade are one of the main reasons behind tuition fee
increases and surging college costs (Mitchell, Leachman, and Saenz, 2019). State funding for
higher education drastically fell during the Great Recession and has not picked up since, leaving
little room for students looking for financial aid. For example, figures from 2018 showed that
overall state funding for public two-year and four-year institutions is still more than $6.6 billion
below its levels before the recession fully made its impact in 2008.

Based on 2017-2018 figures, higher education institutions get the biggest portion of their
revenues from tuition and fees followed by investments, government grants, contracts, and
appropriations (NCES, 2020). Public schools get 41% of their revenue from government sources,
private for-profit schools receive 94%, and nonprofit schools receive 31% of revenues from
tuition and fees. This is a far cry from three decades ago when revenue from tuition was only a
quarter and the rest came from state and local funding.

When state funding goes down, students need to shoulder more of the costs of going to college.
This is one of the reasons why does college tuition keep rising. It has not only made it more
difficult for students to enroll and graduate but has also contributed to a wider gap between
racial and class inequality. Higher costs create stricter barriers to entry into college, which
ultimately deter low-income families.

Here are some key points highlighting the cuts on state funding for higher education between SY
2008 to 2018:

Between SY 2008 to 2018, 41 states spent less per student

States, on average, spend $1, 220 or 13% less per student

Nine states cut their spending per student by more than 20%, while six states cut funding by

more than 30%

There are only nine states that increased their funding per student
Demand for College Education
Demand for higher education shows no signs of slowing down even with a glut of graduates. In
2018, 44% of people in OECD countries aged 25 to 34 years old, have a college degree compared
to 35% ten years ago (Education at a Glance, 2019). Moreover, in the U.S., the number of college
students in the 1990s increased from 13.8 million to 19.9 million in 2019 (NCES, 2019). Meanwhile,
enrollment for undergraduate students is projected to increase to 17 million by 2029 (NCES,
2020).

As more students pursue a college degree, demand goes up and prices go up as well. More
students mean higher education institutions need to recruit more highly educated faculty and
staff who need to be compensated not just with salaries but also other benefits, such as
healthcare insurance. In addition, reputation has influenced enrollments in lucrative programs
like medical and electrical engineering degrees. Moreover, non-teaching personnel holding top
executive positions and receiving six-figure salaries has been a controversial issue.

Apart from instruction-related and administrative costs, schools also have to contend with the
rising costs of providing student services. Services like personal counseling, academic support,
and healthcare have been eating up a considerable portion of campus budgets. These factors
ultimately impact the final fees the schools charge students.

Stagnating Wages
A study from Pew Research showed that real wages—wages after adjusting for inflation—were
higher in 2018 but have the same purchasing power as they did 40 years ago (Desilver, 2018). This
means wages cannot keep up with the 3% annual increase in tuition and fees considering that
wages only increased by 0.3% between 1989 and 2016. The rising cost of college and stagnant
wages amplify the problem of rising college costs since there is not enough income to go around
once you factor in other living expenses. This is why most students—even from middle-class
families—borrow in order to finance higher education.
The rising cost of living also impacts the overall cost of going to college. Aside from tuition and
fees, there are many other expenses related to pursuing higher education. For example, most
students move away from their family homes and stay at school dormitories or apartments near
campus, which means they need to pay for room and board. Other expenses also include food,
transportation, textbooks and other school supplies, equipment and appliances, and school
projects and activities fees.

How Administrative and Facility costs Impact Tuition

Administrative and facility expenses have become a significant component driving tuition
increases in recent years. As colleges strive to enhance their campuses and meet student
expectations, the costs of administrative functions and facility upgrades have risen steadily.

Administrative Growth and Compensation: The number of non-teaching staff in higher

education institutions has increased significantly over the past few decades. Universities have

expanded their administrative teams to include roles in student services, compliance, and

diversity initiatives. The salaries and benefits associated with these roles, especially at

executive levels, contribute heavily to rising operational costs that universities cover through

tuition increases.

Facility Upgrades and Amenities: In an increasingly competitive environment, institutions are

investing in amenities such as state-of-the-art gyms, modern residence halls, and enhanced

dining facilities to attract students. These investments, while beneficial to student life, add

substantial costs to the university’s budget, further pushing up tuition.

Technology and Infrastructure Maintenance: As campuses expand their digital and physical

infrastructure, the costs of maintaining these facilities rise. Technology updates, cyber-

security measures, and campus maintenance require ongoing investment. This demand for

modernized technology and well-maintained campuses has prompted universities to factor

these costs into their tuition rates.

How to Make College More Affordable

Looking at the costs associated with going to college, we can clearly see that there is a hefty
price to pay, especially for families and students who are already struggling to make ends meet.
However, even with these high prices, we also learned that the demand for higher education will
not slow down and undergraduate enrollment is projected to continue its uptick in the next
decade. This is expected as more and more students realize the value and pay off of a college
degree in terms of income and job security. Many students and families are ready to borrow to
afford their education, opting to deal with student debt later.

Though it seems that there is no escaping the rising cost of college and why are tuition costs
rising, there are things you can do to try and make it more affordable. One thing is to apply for
financial aid early and complete all the documents you need for the Free Application for Federal
Student Aid (FAFSA). By doing so, you can increase your chances of getting into the many
universities that use FAFSA as a way to determine and allocate needs-based awards.

Another way you can lessen the cost of college is to look and apply for local scholarships. Most
students tend to check available scholarships from higher education institutions but you can also
try to apply for scholarships provided by local organizations. These types of scholarships may not
cover one hundred percent of your tuition and fees; however, they are less competitive and can
still be a huge help as you pursue your degree.

Obtaining a 529 plan likewise helps since it helps apportion budgets to education. It also
potentially reduces the taxes involved in education costs.

Morevoer, comparing the prices of different types of higher education institutions, it can be a
good idea to choose a public university. This can significantly reduce the overall cost of going to
college. Plus, attending an in-state public institution can provide further savings. Another option
is to go to a two-year community college first to complete the required courses for your chosen
degree.

When it comes to managing the costs of school materials, you might want to consider renting
digital textbooks. You can also buy digital textbooks or loose-leaf formats in order to cut costs.
Additionally, you can look for older versions of a particular textbook or use open educational
resources if they are available.

Key Insights

Rising Tuition Costs: The cost of attending college has consistently increased over the past

decades, with an average annual rise of about 3%. These increases are not limited to tuition

but also include fees and other associated costs of higher education.

State Funding Cuts: Significant reductions in state funding for higher education have

contributed to rising tuition costs. The burden of funding has shifted from the state to

students, increasing the financial pressure on families.

High Demand for Higher Education: The demand for college education continues to grow,

with increasing numbers of students enrolling in higher education institutions, which further

drives up costs.

Stagnant Wages: While the cost of college has surged, real wages have remained largely

stagnant, making it increasingly difficult for families to afford higher education without

resorting to loans.

Other Expenses: Beyond tuition, students face substantial costs for room and board,

transportation, textbooks, and other supplies, which contribute to the overall financial burden

of attending college.

Financial Aid Gap: Financial aid has not kept pace with the rising costs of college, leaving

many students with significant unmet financial needs.

 Strategies for Affordability: Students can take steps to make college more affordable by

applying for financial aid early, seeking local scholarships, considering public or community

colleges, and managing costs for textbooks and supplies.

FAQ

1. Why does college tuition keep rising every year? College tuition rises each year due to

several factors, including cuts in state funding, increased demand for higher education, rising

administrative and operational costs, and the need to offer more student services. These

factors combined push institutions to increase tuition to cover their expenses.

2. How have state funding cuts impacted college tuition? State funding cuts have

significantly impacted college tuition by shifting the financial burden from the state to

students. As state support decreases, colleges and universities rely more on tuition revenue

to cover their operating costs, leading to higher tuition fees.

3. What are the main expenses associated with attending college besides tuition? Besides

tuition, college students incur expenses for room and board, transportation, textbooks,

school supplies, equipment, and fees for various school projects and activities. These

additional costs can significantly increase the overall expense of attending college.

4. How can students make college more affordable? Students can make college more

affordable by applying for financial aid early, seeking local scholarships, choosing public or

community colleges, renting or buying digital textbooks, and using open educational

resources when available. Additionally, creating a budget and managing living expenses can

help reduce overall costs.

5. Why is the demand for college education still high despite rising costs? The demand for

college education remains high because many students and families recognize the long-term

benefits of a college degree, such as higher earning potential and better job security. Despite

the high costs, the perceived value of a college education continues to drive enrollment.

6. What role do wages play in the rising cost of college? Stagnant wages have compounded

the issue of rising college costs. While tuition and fees have increased significantly, real

wages have not kept pace, making it more challenging for families to afford higher education

without taking on substantial debt.

7. Are there any legislative efforts to address the rising cost of college? Yes, there are

legislative efforts aimed at making college more affordable, such as bills to provide in-state

tuition rates for certain students, increase funding for higher education, and expand financial
 aid programs. However, the impact of these efforts varies by state and institution.

8. Can attending a community college help reduce the cost of higher education? Attending a

community college can significantly reduce the cost of higher education. Community

colleges typically offer lower tuition rates than four-year institutions, and students can

complete general education requirements before transferring to a four-year college to finish

their degree, saving on overall tuition costs.

9. What is the impact of financial aid not keeping pace with rising tuition? When financial aid

does not keep pace with rising tuition, students face larger funding gaps that they must cover

through loans, work, or other means. This can lead to higher levels of student debt and

financial strain, making it more difficult for students to complete their degrees and achieve

financial stability after graduation.

10. How can students manage the costs of textbooks and supplies?

Students can manage the costs of textbooks and supplies by renting digital textbooks,
purchasing used or older editions, utilizing open educational resources, and sharing resources
with classmates. Additionally, planning and budgeting for these expenses can help reduce the
financial burden.

References:

Federal Reserve Bank of New York (2020). Household Debt and Credit. New York, NY: Center

for Microeconomic Data.

Mitchell, M., Leachman, M., & Saenz, M. (2019). State Higher Education Funding Cuts Have

Pushed Costs to Students, Worsened Inequality. Washington, DC: Center for Budget and

Policy Priorities

Ma, J., Pender, M., & Libassi, CJ. (2020). Trends in College Pricing and Student Aid 2020. New

York, NY: College Board.

OECD iLibrary (2019). Education at a Glance. Paris, France: Organisation for Economic Co-

operation and Development. https://doi.org/10.1787/f8d7880d-en

NCES. (2019). Back to school statistics. FastFacts. Washington, DC: National Center for

Education Statistics.

NCES. (2020). The Condition of Education: Undergraduate Enrollment. Washington,

DC: National Center for Education Statistics.

Desilver, D. (2018). For most U.S. workers, real wages have barely budged in decades. FacTank.

Washington, DC: Pew Research.

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