The High Cost of Higher Education: Why College Statistics Can Be Unaffordable for Students

For many students, the dream of a college education is increasingly overshadowed by the daunting reality of rising costs. While a college degree remains a critical driver of economic progress and a key to upward mobility, the financial burden it places on students and their families is a growing concern. This article delves into the factors contributing to the unaffordability of college, particularly focusing on statistics related to college costs, financial aid, and student debt.

The College Wage Premium and the Importance of Higher Education

Despite the escalating costs, the value of a college degree remains significant. The "college wage premium," which represents the difference in earnings between college graduates and those with a high school diploma, has remained high. In California, workers with a bachelor's degree earn a median annual wage of $90,000. This contrasts sharply with the earnings of those without a high school diploma (only 5% earn as much) and those with only a high school diploma (only 12% earn as much).

Beyond higher wages, college graduates also experience greater job security and better employment benefits. They are more likely to participate in the labor force, less likely to be unemployed, and more likely to hold full-time positions with benefits such as paid vacation, health insurance, retirement plans, and flexible work arrangements. Moreover, college graduates are better protected during economic downturns, as less-educated workers often bear the brunt of employment losses during recessions.

Higher education is also a critical driver of economic progress. It is also the key policy lever for improving mobility from one generation to the next, especially for low-income, first-generation, Black, and Latino students. In addition to having higher earnings and better job benefits, college graduates are more likely to own a home and less likely to be in poverty or need social services.

The Rising Costs of College

Despite the clear benefits of a college education, the cost of attending college has risen dramatically over the past few decades. After adjusting for inflation, average costs have increased by 37% across California's four-year and public two-year institutions over the last 20 years. In 2023-24, attending a nonprofit private college in California cost full-time undergraduates living off campus an average of $75,000 per year, including tuition, room and board, books, and other fees.

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While tuition is a significant component, housing costs have emerged as a primary driver of rising costs at public colleges. Although public four-year tuition is lower now than it was five years ago due to increased state funding, this trend may reverse in the future. Many students mitigate these costs by living with family, particularly at California Community Colleges (CCC) and California State University (CSU) campuses.

The Role of Financial Aid

Financial aid plays a crucial role in making college more accessible, especially for students from low-income families. California offers generous financial aid programs that can significantly reduce college costs. For example, a CSU student whose family earns less than $30,000 pays an average of $6,200 in annual college costs, compared to $20,500 for a student whose family income exceeds $110,000. Financial aid often fully covers tuition for students attending public colleges, but non-tuition costs like housing, books, and living expenses remain a challenge.

A new report released by Ellucian underscores the importance of financial aid in students' college enrollment decisions and academic journeys across the United States. In fact, almost half of students say a $5,000 difference in scholarship aid would change their top school choice. With 61% of students reporting financial stress negatively impacting their education, it's clear that academic success is directly linked to student financial success.

Student Loans and Debt

Despite financial aid efforts, many students still rely on student loans to finance their education. In California, an estimated 30% of students at four-year universities took out student loans in 2022-23, which is lower than the national rate of 43%. Public college students are generally less likely to take out loans compared to those attending private or for-profit institutions.

However, students who attend for-profit colleges, disproportionately Black and Latino students, are the most likely to have loans that are delinquent or in default. A significant number of students at for-profit colleges do not graduate, and those who do often have lower wages than graduates from other institutions. This financial loss is compounded for those who took out loans but did not complete their degree. Three years after college, 22% of non-graduates have loans in default or delinquent, compared to 12% of graduates.

Disparities in Wages and Debt

The wage benefits of a college degree vary considerably across different majors. Graduates in engineering and computer science earn a median wage of $120,000 annually, almost double what graduates in education make ($68,000). Furthermore, disparities exist in the labor market based on gender and race/ethnicity. Male workers with a bachelor's degree have a median annual wage of $100,000, compared with $80,000 for college-educated female workers.

Unmet Need and Affordability Gaps

Department of Education’s 2019-20 National Postsecondary Student Aid Study (NPSAS:20) underscores a disconcerting reality: most students face a gap between what their families can afford and what they must pay to attend college. That gap, often referred to as “unmet need,” is much larger for American Indian or Alaska Native, Asian, Black, Latinx and/or Hispanic, and Native Hawaiian or Pacific Islander students compared to White students, on average. Additionally, students who received a federal Pell Grant at least once face almost $10,000 of unmet need, on average, while students who never received Pell Grants are typically able to fully cover their financial need with resources to spare.

Data from NPSAS:20 reveal a stark picture: 90 percent of students who received a federal Pell Grant at least once face unmet need, compared to 56 percent of students who never received a Pell Grant. Additionally, while the majority of students across all racial and ethnic groups struggle with unmet need, Black, Latinx and/or Hispanic, and Native Hawaiian or Pacific Islander students are more likely than White students to have unmet need. Black students face the highest average unmet need among all racial and ethnic groups, with about a $9,000 gap between college costs and what students can cover through grant aid and estimated . American Indian or Alaska Native, Asian, Latinx and/or Hispanic, and Native Hawaiian or Pacific Islander students also face large amounts of average unmet need.

Strategies to Address College Affordability

Given the challenges students face in affording college, various strategies have been proposed and implemented to address the issue.

Statewide Solutions

At the state level, many states provide income-based free tuition to state residents. Thirty states offer free community college and nine offer free four-year college. The proliferation of these programs is changing the calculus for all institutions, placing pricing pressure on schools in affected markets.

Individual School Action

Absent or in addition to statewide programs, individual institutions are also taking steps to improve affordability. Elite institutions with large endowments are able to strategically provide free tuition for key segments of students. For example, Duke University offers full tuition grants for admitted students from the Carolinas whose families earn $150,000 or less. For students whose families earn $65,000 or less, Duke also offers financial assistance for housing, meals, and some other expenses without packaging any loans.

Other institutions are exploring innovative models such as "pay-it-forward" programs and grant programs that guarantee to meet the demonstrated need of new freshmen with low family incomes.

Addressing the Needs of Low- and Middle-Income Students

Institutions must fully recognize how difficult the situation is for families with lower incomes. It’s hard to convince a family paying a third or more of their income that college is a strong value. To shape your institution’s future affordability strategy, start by asking these questions: Which students are most vulnerable on affordability? You can’t provide free tuition to all students. But perhaps you can focus on those who need it most. Analysis of your admitted student data should indicate which students decline to attend for financial reasons. Understanding who these students are within the context of your mission should help identify a segment of students to whom your institution should extend additional financial resources. How can you help this segment bridge the gap? Identify the level of support that will solve the challenges of this key segment. Free tuition would be nice, but maybe significantly increased aid or no-loan packaging would make a substantial difference. How can you support this strategy? Start with the students' needs, then think about how your institution might pay for them. Doing the opposite limits your ability to address the problem. Your institution will need to think beyond its current capabilities to make an impact. Imagine an ideal scenario, inform the discussion with institutional realities and back into a practical plan. What is your pricing environment? Consider how state and institutional tuition policies will impact how your tuition strategy will be perceived.

The Debate Over Free College

The question of whether college should be free is a subject of ongoing debate. Proponents argue that free college could close the inequality gap, encourage learning, and develop a better workforce. It could also alleviate student debt, enable more students to attend college, and promote economic growth.

However, opponents raise concerns about the cost of free college, the potential for increased taxes, the possibility of students not taking their education seriously, and the potential decline in the quality of education. They also point out that free college could lead to the decline of private schools and that not all types of college need to be free.

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