Why Is Tuition So Expensive?

Many foreign countries offer free or virtually free college, including Norway, Sweden, Germany, and France. However, American colleges are known for their absurdly expensive college tuition and yearly tuition increases. A typical private American institution can cost upwards of $60,000/year, which is more than the country’s median household income (~$56k/year). I was curious to learn the reasons why college is so expensive and came across two articles (1, 2). Here are the most surprising or critical reasons:

  1. Higher tuition means colleges can offer college tuition discounts. Realistically, very few students can afford to pay full tuition. Colleges can leverage that to offer tuition discounts (financial aid packages) of varying amounts. Some may only have to pay $5k, others will pay $20k, some may receive a full ride, etc. Admissions officers can then build a freshman class composed of accomplished, competitive students who are all vying to receive financial aid. This is an incredibly common tactic used commonly by private universities since their tuition tend to be exorbitantly higher than tuition at public universities.
  2. Similarly, yearly tuition raises are common because institutions are aware of government-sponsored student loans. According to the first article, federal student aid accounts for most of the college tuition increases between 1987 and 2010. Most, if not all, students are eligible for loans, and there have been more types of loans to respond to the increase in student demand. For instance, unsubsidized loans are a relatively new concept.
    It’s a simple principle: if students can borrow more money, colleges can charge more. And because there are more ways to borrow money, colleges can take advantage of this to raise tuition.
  3. State funding can’t keep up with enrollment. Many state governments have cut funding to higher education institutions and allowed colleges to raise tuition to compensate for the deficit. Studies have shown that when state funding is constant or increasing, tuition remains level. But when state funding decreases, college tuition increases. 80% of American students attend public universities, so government budgets don’t play a small role in determining tuition costs. Although state funding has been increasing slightly, university enrollment has been skyrocketing in comparison.

This annoys me because it feels like higher education institutions are becoming heavily monetized. Some of the methods and logic universities use (such as the tuition discounts outlined in Point 1) feel sleazy. Point 3 is the most intriguing because I attend a public university that will face an over-enrolled freshman class next fall. I’m wondering by how much tuition will be raised if we don’t have enough support from the state.

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