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Why the price tag of a college degree continues to rise


Why does college cost so much?

It’s a question parents, students, and politicians often ask and the answer is often elusive. There is much speculation about what is exactly to blame for college costs that tick up more and more every year above the rate of inflation and well above lagging family incomes.

You’ve probably heard about a lot of reasons for the price surge: tenured professors, climbing walls, luxury dorms, too many administrators, overpaid presidents. But it’s almost impossible to isolate one or two causes. Trying to dissect a university’s budget is nearly impossible. Money is constantly moving from parts of a university that make money (large English lecture classes for freshmen) to subsidize those segments that lose money (small senior chemistry labs).

But every year, researchers at the Delta Cost Project, which is run by the American Institutes for Research, attempt to make sense of higher education spending by explaining in detailed reports where the money to pay for college comes from and where it’s spent. Its latest report was released this month. Here are two key reasons its researchers said colleges costs continue to rise even in an era of low inflation:

1. Students demand more services outside the classroom and colleges are providing more amenities to attract applicants. In the past decade, spending on student services, which includes everything from mental health services to career counseling to staffing student recreation centers with climbing walls and lazy rivers, grew by more than 20 percent at private colleges and the top public universities.

Spending on classroom instruction pales in comparison to what is spent outside the classroom when the cost of student services is combined with academic and institution support, which includes things such as libraries and technology. At some private colleges, for instance, 58 percent of the dollars go to student and institutional support services, compared with just 42 percent that is spent on actual instruction.

On many campuses, this expansion of student services is what has driven a 28 percent expansion of the higher education workforce since 2000, according to a separate report from the American Institutes for Research.

In many cases, however, that is probably money well spent if a college is trying to stay in business. In 2013, a group of researchers from the University of Michigan found that while top-ranked schools have an incentive to spend money on academics to attract smart students, everyone else is better off focusing on what they called “college as a country club.” The study said country club amenities differentiate less-selective campuses for prospective students who care more about the “resort” experience of college.

2. Students are shouldering much more of the cost of their degree at public colleges and universities. As late as 2001, when I covered North Carolina higher education as a reporter, a state resident could go attend classes on the flagship campus at Chapel Hill for around $2,000 a year in tuition and fees. Today, tuition and fees are approximately $8,500. That’s largely because states like North Carolina have been getting out of the business of higher education.

According to the Delta Cost Project, student tuition dollars at public research universities covered around 50 percent of educational costs in 2008. Today, they cover nearly 63 percent. Meanwhile, when measured per student, state spending on instruction at public colleges is at its lowest point since 1980.

Sure, in actual dollars, spending on higher education by the states is up, but it hasn’t kept pace with the rise in enrollment during the last decade, especially as more students go to public colleges. If the current trends continue, beginning in 2022 spending on higher education will reach zero in states such as Colorado and Alaska, and by the 2030s in South Carolina and Massachusetts.

It’s popular political rhetoric right now to suggest college tuition be free, even at Harvard University, where a group of candidates for the Board of Overseers wants to end tuition for undergraduates. But all those proposals do is shift the costs to the federal or state government, or in the case of Harvard to its massive $38 billion endowment (which might not be a bad idea).

By essentially capping tuition at zero and saying students have no skin in the game for their education, states in particular will carry most of the responsibility in paying for higher education. If recent history is any indication, states can’t be always trusted to do the right thing. Just look at California in recent years, where public universities turned away tens of thousands of qualified students for a lack of state funds.

Another suggestion to cut costs for students has been for higher education to follow the playbook of the airlines and now the cable companies and unbundle their services. Right now, students pay for the complexity of a university campus whether or not they use all the services.

One concern about unbundling higher education is that colleges and universities really don’t know which individual pieces of the overall experience actually provide the most value for their students. The individual parts could end up not equaling the value of today’s whole. And for financially needy students, the services they need the most—such as academic advising or tutoring—might end up costing the most if wealthier students forgo those services.

Finding solutions to reducing college prices seems just as difficult as figuring out why they are rising in the first place. But with family incomes lagging as college prices continue to rise, the time for finding workable solutions is running out for an increasing number of students.