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What’s behind the sky-high cost of a college education — and are there any solutions?

The Biden administration’s announcement that up to $20,000 in student loans will be canceled for borrowers will be welcome relief for millions, as long as the courts allow it. But that relief won’t do anything to slow the rapidly rising costs of college.

In the 1963-1964 academic year, the median annual published cost of tuition and fees in the state was $243 at public four-year institutions and $1,011 at private four-year institutions, according to data from the National Center for Education Statistics. This excludes board and lodging.

If the university’s published costs were in line with inflation, annual tuition and fees would have been $2,076 at four-year public universities and $8,624 at private institutions for the 2020-2021 academic year, according to data from the University. National Center for Education Statistics in constant dollars, or income adjusted for inflation.

But in the 2020-2021 academic year, the median state tuition and fees price tag at a four-year public institution was $9,375, and at private four-year institutions it was a whopping $32,825. With student housing, those costs skyrocket – some schools charge those who can afford it over $70,000 per year.

Why is university so expensive?

“There isn’t one answer,” said Beth Akers, author of “Making College Pay” and senior fellow at the American Enterprise Institute. “You can ask a lot of different people and they have a lot of different reasons.”

However, the sticker price that an institution lists on its website and the net price can be quite far apart, says Phillip Levine, an economist at Wellesley College. The net price is what students pay after need-based assistance and merit scholarships. The net price has risen faster at public institutions, where state funding has not kept pace with the price rise.

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The government does not track the net price students pay to public versus private institutions. But according to the Executive Board, students on average receive more financial support from private institutions. And the net price paid by families to private colleges for tuition, room and board was about $33,720 at private institutions, compared to $19,230 at public colleges for the 2021-2022 academic year.

Over the past two decades, the published price of tuition and tuition at private four-year institutions has risen much faster than net tuition. Over the past 20 years, their sticker prices have risen 54% in inflation-adjusted dollars, although net tuition prices — what students pay after taking into account scholarships and grants — have risen only 7%, according to College Board and National Center for Education Statistics. data analyzed by the Manhattan Institute.

For many public institutions that have seen a decline in government funding, the financial picture is worse. The published price of tuition and fees has increased by 102% at public four-year institutions, adjusted for inflation, with net tuition and fees at four-year public schools increasing by 115% over the past 20 years.

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The sticker price versus the average net price of tuition, fees, room and board, according to College Board data.

Source: Trends in College Pricing. © 2022 The Executive Board. www.collegeboard.org


“Often we overestimate the rising costs of college,” Levine said. “Because what we do is mainly focus on the sticker price.

But the vast majority of students don’t pay the sticker price at public or private schools, he said.

Public institutions “have moved away from taxpayer funding and to collecting income through individual tuition fees,” Akers said.

Upper-middle-class students and affluent families who often make up the governing and media classes are the ones who pay full price, Levine noted.

“The difference is that this is the price high-income families have to pay,” Levine said.

Administrative costs and facilities

The number of administrative staff added to higher education institutions has exceeded the hiring of teachers in recent decades.

The number of higher education administrators grew twice as fast as the number of students in the 25 years ending in 2012, the New England Center for Investigative Reporting found by analyzing federal data.

And from 2010 to 2018, spending on student services grew 29% and spending on administrative functions grew 19%, while spending on education grew just 17%, according to a 2021 report from the American Council on Trustees and Alumni.

Colleges and universities have become more comprehensive in the services they offer, and in general, students are reaping the benefits, he said Janet Napolitanothe former governor of Arizona and former secretary of the Department of Homeland Security, who served as president of the University of California system for seven years.

“I’ve never had students come up to me and say, we need fewer Title IX officers, or we need to reduce mental health services, or we need to reduce the number of people helping at the financial aid office,” said Napolitano, who now the director of the Center for Security in Politics at the University of California, Berkeley.

“The point is that over time, as universities have borne the cost of providing not only the academic teaching and research aspect of a college degree, but all kinds of additional or related services that come with it, so have I think added to the cost.”

But administrative expenses aren’t responsible for most of the rise in the university’s sticker price, Akers said.

Then there are the headlines about luxury student amenities like lazy rivers at Texas Tech University or rock climbing walls at the University of Maryland. But those additions are also easy targets and still don’t come close to explaining the sticker price hike for the university, Akers said.

Market forces

Higher education is competitive – Harvard and Princeton will always compete for the same very select group of the country’s most promising students.

“It’s also true that in some ways higher education doesn’t look like a normal market,” Levine said.

In a normal market, everyone pays the same price. “Everyone doesn’t pay the same price in higher education,” Levine said. In many schools, those who can afford less pay less, and at a handful of the nation’s most elite schools, including Harvard, Yale, and Stanford, students who are accepted and with a household income of less than $60,000 get a free ride.

That lack of price transparency in what the net price will be for a prospective student is also something that distorts the market, Levine noted, as most college applicants don’t know what they’ll actually pay until they’re accepted, commit to a university and request help.

Levine created a tool, MyinTuition, that allows students to estimate their net tuition costs based on factors such as how much their family has in savings and investments, their GPA, and their SAT scores. He built the tool when he was trying to calculate how much he would pay for his own children’s education.

But his website does not list most higher education institutions, and the calculator is only an estimate and is not binding.

Student grants

Then there are student loans.

“People argue all the time that the fact that we’ve been able to lend people so much is driving the price up, and I think there’s some truth in that,” Akers said.

“It’s not really a basic economics argument that the availability of loans has pushed the price up, but I think it’s more of a behavioral issue.”

Millions of Americans will continue to go to college and take on mountains of debt to do so, because the financial—and even social—benefits of attending college still generally outweigh the financial costs, Akers and Levine noted.

“The return on college graduation is significant,” Levine said. “And simple calculations will basically indicate that for the typical student, attending college is well worth it relative to its cost.”

But “that doesn’t mean it’s worth it for everyone,” Levine added.

According to data from the Social Security Administration, men with bachelor’s degrees earn about $900,000 more in average lifetime earnings than their high school counterparts. Women with a bachelor’s degree earn $630,000 more in their lifetime than women with only a high school diploma.

And a 2021 study from Georgetown University found that high school graduates earn an average of $1.6 million in their lifetime, compared to $2.8 million for those with undergraduate degrees.

So, over the span of a lifetime, spending $100,000 on a college education with those returns is a relative “bargain,” Akers said.

Millions will continue to pay more and more for school, as long as the benefit generally outweighs the cost. But at some point “market forces will continue to push the price up until it’s no longer worth it,” Akers said.

Napolitano is skeptical of the Republican argument that universities will use the Biden administration’s student loan waivers as an opportunity to significantly inflate prices.

“I think any college president who relies on the assumption that loans will be canceled in the future is living in a fairyland,” she said.

Westwood College Student Debt
President Joe Biden speaks about student loan debt forgiveness in the Roosevelt Room of the White House, August 24, 2022, in Washington. Education Minister Miguel Cardona listens to the right.

Evan Vucci / AP


Are there solutions?

Akers said the solution to addressing the university’s ever-increasing costs is the opposite of student loan cancellation that the Biden administration is undertaking.

That said, “I don’t want to abolish subsidies,” Akers said. “I don’t want to abolish the student loan program.”

But graduates who can afford to repay loans should do so, she said.

One way to cut costs would be to shorten the time it takes to get a college degree. If students can get college credits for courses while still in high school or even high school, that would cut the time they pay for four-year colleges. Napolitano, for example, believes that state governments should further encourage students to attend community colleges, to attend much cheaper community colleges both while in high school and afterward, so that they can transfer those credits to a four-year institution. .

There should also be more avenues to get good, high-paying jobs, Akers said, adding that she believes there will be “some sort of natural correction,” with more employers dropping the requirements for college degrees. Some companies have already started doing this in the current tight labor market. Apprenticeships and professions should be celebrated, she argued, saying political and social leaders should celebrate those trajectories too.

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