Decoding the Rising Costs of College Tuition

The escalating price of college tuition has become a major concern for students and families alike. While the sticker price of higher education continues to climb, the reality of what students actually pay is far more complex. This article delves into the multifaceted reasons behind high tuition fees, explores the discrepancy between sticker price and net price, and examines potential solutions to make college more affordable.

The Ever-Increasing Sticker Price

Over the last 30 years, the average tuition for both public and private four-year colleges has essentially doubled after adjusting for inflation. This increase has outpaced inflation, making college seem increasingly unattainable. To illustrate, a New York Times article from 1970 highlighted a $200 tuition increase at Harvard University, bringing the annual cost to $2,600 (approximately $21,000 today when adjusted for inflation). Today, tuition at Harvard exceeds $59,000, with the total cost of attendance, including housing and food, surpassing $86,000.

The College Board's annual report tracking college prices shows that tuition for in-state students at public four-year colleges peaked in 2012 and has since declined.

Net Price vs. Sticker Price: Unveiling the True Cost

While the sticker price can be daunting, many families don't actually pay it. Students often receive financial aid or merit-based scholarships, reducing the actual cost, known as the net price. Although the net price is still higher compared to two decades ago, it has remained relatively flat or even decreased in recent years.

Data from the College Board’s most recent Trends in College Pricing report shows that while published tuition and fees (adjusted for inflation) rose steadily until about 2019-2020, prices then began to fall and leveled off.

In 2006-07, average published tuition and fees (adjusted for inflation) at private nonprofit four-year institutions was $34,760. Average in-state tuition and fees at public four-year and two-year institutions were $9,040 and $3,540, respectively. By 2019-20, average published tuition and fees had increased to $45,310 at four-year nonprofits, $12,830 at public four-years, and $4,550 at public two-years, representing an inflation-adjusted increase of about 30% among nonprofit four-years and public two-years and 42% among public four-years.

In 2014-15, students at nonprofit four-year, public four-year, and public two-year institutions faced average net tuition and fees of $18,680, $4,140, and -$170, respectively. In 2024-25, these prices stood at $16,510, $2,480, and -$710. The net cost of attendance includes all expenses associated with attending a college or university, such as tuition, fees, room and board, books, transportation, and personal expenses. In 2024-2025, average net cost of attendance for students was $36,150 at private nonprofit four-year institutions, $20,780 at public four-years, and $15,810 at public two-years.

Factors Driving Up the Sticker Price

Several factors contribute to the rising sticker price of college tuition:

Declining State Funding: At public institutions, reduced state funding has historically forced colleges to increase tuition to compensate. While state funding has rebounded somewhat in recent years, the impact of previous cuts remains.
Administrative Bloat: The growth in administrative positions and salaries at colleges and universities also contributes to higher costs.
The Murky Market: The actual costs are often murky. Some families pay one thing, others pay another price. And no college seems to cost the same. The market is opaque, and that's another reason tuition is high: Families often don't know until the end of the admission process how much these schools will cost them.
Competition and Prestige: Colleges compete to attract students by investing in new buildings, dormitories, and athletic facilities, which drives up costs. A high price tag can also dictate prestige, attracting wealthy families willing to pay full price. At Harvard, 40% of the incoming class pays full price without financial assistance.
Student Loans: The availability of student loans has been a subject of debate. Some experts argue that increased access to student loans has enabled colleges to raise tuition, while others point to rising costs as the primary driver. Since 2007, the amount of student debt held by Americans has more than tripled, to roughly $1.6 trillion.

The Role of State Funding

Decades ago, state and local governments provided public colleges with three-quarters of their operating revenue, with tuition accounting for fully one-quarter. After steady cuts in funding for higher education, state and local governments today provide half of public college revenue. The Great Recession accelerated this trend. States responded to the financial crisis with deep cuts in funding for higher education, which prompted colleges to raise tuition further, reduce full-time faculty, drop courses and majors, and, in some cases, close campuses. As the Center on Budget and Policy Priorities reported, overall state funding for public community colleges and bachelor degree-granting institutions in the year ending 2018 was $6.6 billion less than it had been immediately before the Great Recession.

Most of the run-up in tuition prices at public institutions occurred between 2000-2001 and 2012-2013 when states substantially reduced higher education spending due to the budgetary effects of 2001 and 2008 recessions. During these years many public institutions increased prices to make up for lost revenue. Inflation-adjusted prices at public four-years increased at almost twice the rate as at nonprofit four-years. As state appropriations began to recover in 2013, the rapid run-up in tuition prices abated and prices at public institutions fell at a faster rate than at nonprofits. Moreover, increased federal, state, and institutional financial aid helped shield low- and middle-income students from much of the run-up in published tuition prices.

Read also: Affording ECU

The Impact of Faculty Costs

According to the National Center for Education Statistics, faculty salaries and benefits accounted for 34% of overall operating budgets at 4-year public institutions in 2021. While rising faculty salaries can contribute to higher tuition, the American Council on Education, a higher education membership community, argues there are numerous contributing factors which are passed on to students through higher tuition and fees.

According to the American Association of University Professors (AAUP), one of the ways colleges and universities have attempted to reduce the tuition increases is to use adjunct faculty rather than higher new tenure-track faculty. Over the last few decades, the proportion of full-time tenured faculty has dwindled while the number of adjunct professors and graduate student instructors has surged. AAUP reports that 68% of faculty positions are now non-tenure-track (as compared to 22% in 1970. While adjuncts are paid less than full-time faculty, other associated costs may reduce the anticipated savings.

Efforts to Control Costs and Improve Affordability

Various solutions have been proposed and implemented to address the issue of rising tuition costs:

Standardizing Financial Aid Offers: Efforts are underway to standardize financial aid offer letters, allowing students to compare offers from different colleges more easily.
Tuition Freezes: Some institutions have implemented tuition freezes to hold down costs. Purdue University, for example, has locked undergraduate tuition at around $9,000 a year for in-state students and $28,000 for out-of-state students since 2013. This approach involves setting tuition first and then adjusting revenue goals and spending to meet what the university can afford.
Increased Financial Aid: Increased federal, state, and institutional financial aid has helped shield low- and middle-income students from much of the run-up in published tuition prices. Education economists Emily Cook and Sarah Turner report that net tuition paid by students with less than $30,000 in family income at four-year public institutions increased on average by only 4.5% between 2008-2009 and 2018-2019, even as sticker tuition rose by nearly 33%.
Tuition caps and freezes: A growing number of states implemented tuition freezes and caps.
Addressing non-tuition costs: For the average student at a public four-year institution, the total net cost of attendance ($20,780) dwarfs what they pay in net tuition ($2,480). Levine reports that students from families with an income of less than $40,000 attending public four-year institutions face an average net total cost of attendance of about $14,000-and annual unmet need of about $6,000 even after accounting for student loans and Federal Work-Study.

Alternative Pathways to Higher Education

For students seeking more affordable options, several alternatives exist:

Community Colleges: Community colleges offer an affordable alternative, with the option to transfer later to a four-year school. According to the College Board, the average annual cost of tuition at an in-district community college is $3,770.
Trade Schools: Trade schools, vocational schools, or technical colleges provide hands-on training for skilled labor, with students graduating in six months to two years, at a much lower cost than universities.
Online Degree Programs: For many students who can't or don't want to take on the financial burden of a typical four-year college tuition, and still others who simply aren't looking for that traditional experience, lower-cost options do exist, from community colleges to online degree programs.
Coding Boot Camps: Coding boot camps are another alternative for a growing number of information technology careers, such as software, web development, and cybersecurity.

The Broader Societal Impact

Tuition increases are part of the story of exploding student loan debt. Cuts in state funding, tuition increases, and stagnant wages have caused student loan debt to skyrocket, making it harder for students to enroll and graduate.

Read also: Withdrawals for College: A Guide

A bachelor’s degree is still Americans’ surest route to the middle class. Georgetown University’s Center on Education and the Workforce compared the lifetime earnings of workers with no more than a high school diploma to those with degrees or some college experience. As writer Jon Marcus explained in The Hechinger Report a year ago, people with only a high-school education suffer more. They are more prone to depression, live shorter lives, need more government assistance, pay less taxes, divorce more frequently, and vote and volunteer less often. Some 300,000 Americans a year are now dying prematurely from drugs, alcohol, and suicide-the so-called “deaths of despair” that are taking an excessive toll on those with no education after high school.

Economics Professor Michael J. Hicks of Ball State University underscores a fundamental economic reality when he says, “differences in economic growth across regions-nations, states, cities, and counties-are almost exclusively caused by differences in educational attainment.

The Net Price Over Time

Figures 1A and 1B show the key findings. Figure 1A provides the results for students at public institutions. In the 1995-1996 academic year (all years on the graph are labeled by the end of the academic year), students with family incomes under $50,000 typically faced a net price of about $12,500. The typical net price increases with income. Every additional dollar of income translates to around a 16-cent increase in net price. Families with family incomes of roughly $75,000 typically faced a net price of around $16,000. Once income reaches the vicinity of $100,000, the net price hits the maximum of around $19,000. In each subsequent year, that relationship has shifted up. By 2019-2020, students from families with incomes below $50,000 faced a typical net price of $18,000. A family with an income of around $125,000 paid the maximum net price of $29,000. This upward drift in net prices at public 4-year institutions indicates that they are becoming increasingly more expensive over time for students at all levels of the income distribution.

Figure 1B shows the same relationships for 4-year private institutions. Prices at private institutions were higher than at public institutions for students at all income levels each year. Net prices also increased with incomes at a slightly higher rate (18 cents per dollar of income). Pricing patterns over time, though, observed at these institutions are not quite the same as those at public institutions. The fundamental difference is that net prices for lower- and middle-income students stopped rising in 2007-2008. One should not interpret this finding as indicating private colleges are becoming more affordable for low- and middle-income students. Students with incomes under $50,000 are still being asked to pay around $25,000 to attend a typical private institution. Net prices charged to higher-income students at these institutions have risen consistently over time. In 1995-1996, the maximum net price at private institutions was $37,000. Students hit that threshold at a family income of around $150,000. Net prices paid by students enrolled in the small set of private, highly-endowed private colleges and universities that meet full need are unlikely to follow these patterns. Students pay their EFC at these institutions, perhaps along with loan and work expectations. As I have shown elsewhere, their net prices are lower than at other private institutions for all but higher-income students. They are even lower than at public institutions for lower-income students. For students with the same EFC at different points in time, there is no reason their net price would have changed much. Note that the scales on the graphs for public and private institutions are different to best illustrate the pricing patterns at each type of institution. Figure 2 is designed to overcome that problem, including data for both sets of institutions for a subset of years on the same scale. It shows that private institutions are clearly more expensive than public institutions, as one might expect.

The Importance of Understanding Net Price

This analysis yields several implications for policy discussions regarding college pricing. First, the nearly universal focus on the sticker price in public discourse is detrimental to our understanding of college costs. It is the easiest measure to track, but it is a misleading statistic that a small and declining number of students pay. Second, we need much better information about how much students in different financial circumstances would have to pay for college and how those prices have changed over time. Understanding how much lower- and middle-income students pay is particularly important if we are seeking to improve college access. That information is limited now. Third, college costs are still too high, and increasingly so over time. College is indeed expensive for higher-income students, but the affordability problem is much greater-and more consequential-for lower- and middle-income students.

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