Internal and External Factors behind Rising Tuition Costs

Posted in: College Planning

For more than a decade, college tuition has been rising far beyond the rate of inflation at public colleges and universities. According to College Board figures, tuition and fees increased 5.4 percent annually above inflation in the decade since the 2001-2002 school years. The economists suggest that there is “strong suggestive evidence” that decreases in state and local funding of public universities is linked to tuition increases, particularly since the recession. From 2000 to 2010, funding per pupil at state universities fell by 21 percent from $8,257 to $6,532 in inflation adjusted dollars. In addition, every year from 2001 to 2011, at least a third of states experienced funding cuts and in more than half of those years, two-thirds of states did. This end result will be more college students taking on more debt that they will be unable to payback.

State governments are not the only reason tuition costs have increased so much. Between 1993 and 2007, total university expenses rose 35%.  But administration expenses rose a whopping 61% and instruction expenses rose 39%. Most university expenses such as food, water, fuel, computer labs, and new facilities are paid for with donations and debt. In this case, the biggest cost culprit is labor costs. The universities are hiring more administrative employees than ever before, while maintaining the same number of professors. While enrollment rose between 1993 and 2007 by 14.5%, administrators employed per 100 students rose nearly 40% and spending on administration per student rose by 66%. So how do the universities get away with this? The “baby boomlet” born between 1988 and 1995 has flooded colleges with demand for a limited number of spots. Even so, college enrollment has risen by 138% over the past 40 years.  This rising demand has tolerated increased costs and allowed universities to raise prices uninhibited by normal economic forces. If salary and overhead increases continue at the current pace, universities will price themselves out of the reach of most Americans. Perhaps when this happens, administrators will be forced to get serious about cost control.

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