Why is School Tuition So Expensive Today?

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Ask any public college administrator about the increase in tuition costs, and they’ll blame cuts in state funding. Is that the cause?

I immediately had a hard time believing so. For most of our history, taxpayers have been contributing more and more to college education. A New York Times piece claimed that, adjusting for inflation, state funding has increased more than sevenfold in the last 55 years. It was $11.1 billion annually in 1960. In 2015, it’s $81 billion.

From the big-picture view of half-century intervals, states haven’t been outrun by the increase in college attendees, either. They provide more per student than they did in 1970. Yet somehow, a year at a state college today costs about 3.6 times more than in 1971.

So, why are colleges complaining about budget cuts when there’s so much more funding today than there was in the past?

Believe it or not, there is truth to their claims. The high point for overall state funding was $90.5 billion (in 2013 dollars) in the 2007–2008 academic year.The Washington Post reports that funding per student was then hacked down 23% as a result of the recession.

States have been trying to kick in more as the economy slowly recovers. However, they’re still behind pre-recession numbers by more than $2,000 per student.

That’s not the only problem. Funding per student was at its highest back in 1988. With the number of American college students increasing at a phenomenal rate, government contributions just haven’t been able to keep up since then.

There’s no question that colleges have a legitimate grievance when they complain about budget cuts. The drop in per-student funding does help to explain why tuition has become more expensive since 1988. But it certainly doesn’t tell us why prices have increased 360% since the early ’70s, when funding per student was lower than it is today.

  • There have been state funding cuts. But public college is far, far more expensive than the cuts could justify.

What about private colleges? What’s their excuse when they aren’t affected so much by government funding?

For them, the loss of income appeared as a drop in “gifts, investments and endowments.”[1] The recession hit these particularly hard. After recovering somewhat from a brutal dip in 2008–2009, income from these sources was still close to 50% lower in 2010 than it was a decade prior.

Even so, private colleges have much larger incomes than public ones. Private bachelor’s and research institutions often receive tens of thousands of dollars per student in gifts etc. and investment returns. These amounts regularly overshadow what they charge for tuition. They also outweigh the amount of state assistance provided to public schools. Why, then, has tuition increased so consistently, even on the good years?

Colleges receive too much money for funding issues to explain the tuition hikes. So the question is . . .

Where Does All That Money Go?

Everywhere. The Delta Cost Project examined college spending trends from 1998 to 2008.They compared changes in spending in seven different areas: instruction, research, student services, public service, academic support, institutional support, and operations and maintenance.

Here are the areas where spending increased the fastest, by sector:

  • Public research: operations and maintenance, 26% increase.
  • Public master’s: research, 47.9%.
  • Public community: operations and maintenance, 16%.
  • Private research: academic support, 40.8%.
  • Private master’s: student services, 27.4%
  • Private bachelor’s: student services, 31.4%.

While there were some minor cuts here and there, net spending increased significantly. All varieties of colleges were spending more money on just about everything each year.But for those looking for specific things to blame . . .

Administrative staff. The New York Times article cited previously suggests that massive expansions of administrative staff are to blame. Author Paul Campos points out that the California State University system more than tripled its administrative staff between 1975 and 2008. At the same time, the number of full-time faculty members increased by less than 3.5%. There are now more administrators than full professors.

Campos’s hypothesis seems to add up. The cost of attending college has more than tripled, and so has the number of highly paid individuals who aren’t even teaching.

Of course, we can’t be too hard on them. The forward march of technology has created a few new essential positions. Who would go to a college that didn’t have a full complement of IT professionals? But whether such an enormous administrative staff is justified or not, it explains where a lot of the money is going.

Sports. Another New York Times article reports that expenditures on sports have increased at a remarkable rate. While public four-your colleges spent an average of 1.6% more per student in 2011 than in 2004, they put roughly 25% more into athletics.Community colleges spent 2.6% more per student and 35% more on athletic programs per athlete.

  • At community and public colleges, athletic expenditures are increasing at about 13.5 to 15.5 times the rate of overall spending.

Research and side businesses. At colleges that double as research institutions, the amount spent on instruction increased by a bit less than 10% between 2000 and 2010. Research spending increased by 25%. On “auxiliary enterprises such as hospitals,” it increased by nearly 30%.

How can they keep spending more when funding has dropped and tuition costs are such an enormous problem?

Why Do Colleges Keep Flinging Money at Everything?

In his book Where You Go Is Not Who You’ll Be, Frank Bruni writes about a major problem in how colleges are deemed better or worse than their competitors: the U.S. News & World Report rankings. This popular system rates colleges based on numerous factors, many of which may be quite useful in determining the quality of a college. But one surprising factor is how much the colleges spend.

Colleges get better rankings by spending more per student. They can also climb higher by paying their professors more. The result is that colleges that care about these rankings are encouraged to charge and spend larger and larger amounts.

In addition, it gives schools better rankings if they are more selective, in terms of both rejecting more students and accepting those with higher SAT and ACT scores.

They’ve built a vicious cycle. This encourages colleges to raise tuition so they can spend more, allowing them to rank higher, get more applicants, and in turn reject more hopeful young students in order to rank even higher. And when they become more exclusive, they can get away with charging more.

Why, then, would they do anything to reduce the cost of tuition?

Let’s forget about the U.S. News for a moment. If you heard that one college accepted 90% of its applicants and another accepted 10%, what would you think? Which one would you want to go to? Which would you want your child to go to? Assuming you were accepted into both, would you even take a look at the one with a 90% acceptance rate?

We instinctively assume that more selective schools are better. For all we know, the one with the 90% acceptance rate might offer a much higher-quality education. We just don’t really care when we can brag about getting into a school that rejects the vast majority of applicants. This is perhaps the most basic truth of college marketing.

Colleges are therefore highly motivated to have lower acceptance rates, and that means getting as many applicants as they can. They need a good marketing plan to accomplish that.

If I wanted to give a second guideline to colleges trying to promote themselves, it would be the age-old marketing adage, “Sell the sizzle, not the steak.”

In this case, the steak is the actual college education. It’s the degree at the end. It’s the career it will help students get after they graduate.

Forget about all that. What your prospective students want is the sizzle.

The sizzle is the attractiveness and modernity of the athletic, scientific, and computer facilities. It’s the comfort and spaciousness of the dorms. The beauty of the campus, the quality of the food, the speed of the Internet, the excitement of the local nightlife. How good-looking and single the other students are. How much they’ll impress everyone by getting into such an exclusive institution.

That is what you want to sell. To do so, a college needs to spend, spend, spend.

And so tuitions continue to rise.

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