Why College is So Expensive in the USA

In the past 20 years, tuition costs at private colleges have increased to 144% On the other hand, tuition costs at in-state and out-of-state public institutions have jumped 211% and 171%, respectively. There are many reasons why college is costly, but there are also various ways to make it accessible.

Don’t let the steep cost of college cost you your desire to have a high-paying job one day.

Most of the time, what you see on brochures and websites — the sticker price — is not what your family will have to pay.

I will talk about this matter and so many more in this post, so read on if you have always believed you are bound to be a bachelor’s degree holder but feel that tuition costs can keep that from happening.

college money

7 Reasons Why US Colleges Cost More Compared to Other Countries

Many different reasons exist why higher education in the US is more expensive than elsewhere on the planet. Increased demand for college degrees and rising operating costs are just some of them. Reduced state funding, which causes public schools, in particular, to hike up tuition costs, is another.

Based on a CNBC report, attending college abroad is usually cheaper than going to a private school in the country — even if you take into account travel costs!

It adds that sometimes, too, you can earn a degree from an institution that’s as or even more prestigious.

Some of the most affordable places to study outside of the US include many European ones such as Norway, France, Germany and Poland. In Taiwan, a year in a liberal arts program can cost around $3,300 to $4,050. In Mexico, on the other hand, undergraduate international students usually pay about $6,300 per year.

As mentioned earlier, one of the primary reasons behind the steeper cost of college in the US is the fluctuation in the state funding received by public colleges and universities.

Back in the academic year 2015 to 2016, for instance, state funding decreased by 11% in the last 10 years. Naturally, with lower funding and the very same operating costs, public schools had no other choice but to raise tuition costs. For the fiscal year 2021, however, state funding for them increased by around 4.5%.

The rising demand for higher education and the limited supply for it is also a contributing factor to the fact that it’s more expensive to go to college in the US. We will discuss this matter further in a few — don’t stop reading now!

Colleges Advertise Overinflated Sticker Price

The sticker price is the advertised total yearly cost of a college education. Also known as published price or cost of attendance (COA), it’s what’s stated on brochures and websites.

The net price, meanwhile, is the same amount less scholarships, grants and aid. Most college students don’t pay sticker prices.

During the college list-building process, the cost is one of the most important considerations.

But not too many graduating high schoolers do the math to obtain the net price, which is lower than the advertised cost.

As a result of this, some of them steer clear of colleges that would have been a perfect fit for them due to a seemingly exorbitant asking price that’s simply way beyond the family’s budget.

One of the reasons why colleges and universities present sticker prices, even though they know for a fact that most of their students will pay much less, is to attract more applicants.

A steep price tag will be associated with students from wealthy families with top-notch education — college X has a higher asking price than college Y, therefore college X must be the better option.

On the other hand, an expensive COA will be equated by students from low-income backgrounds with higher financial aid packages.

Either way, the advertisement of sticker prices is a win-win for colleges.

Private Schools Cost More Due to Lack of State Support

Unlike public colleges and universities, private schools do not receive funding from state governments, which, for the last fiscal year, amounted to a combined $105.5 billion. Due to this, institutions of higher education operating privately rely heavily on tuition fees and donations for their operating costs.

financial aid

Alumni donations and endowments — private colleges count on these things in order for them to be able to stay afloat. And then there’s also the fact that they also depend on the money their students shell out.

This is exactly why for-profit private schools, which run like businesses, tend to have steep asking prices.

Based on the latest figures from the Education Data Initiative, the average tuition at 4-year private colleges is $32,825. On the other hand, the average tuition at in-state and out-of-state public schools are $9,375 and $27,023, respectively.

So, in other words, attending a public college can be anywhere from 17% to 71% cheaper than going to a private one.

It’s true that the sticker prices at private colleges and universities are higher than the sticker prices at their public counterparts, which is why they tend to intimidate low-income students.

However, the net price, which, as earlier discussed, is the amount of money students pay after all possible deductions, tends to be substantially lower than the sticker price.

That’s because, more often than not, a private school offers higher financial aid awards. Meanwhile, the net price at a public institution isn’t that lower than the sticker price.

Is Going to Private Colleges Worth It?

Private college graduates tend to earn more than 8% annually than public college graduates. However, based on the latest statistics, those who attend private schools tend to graduate with higher federal student loan debt upon graduation. Sometimes, they can owe up to over 30% more than public college graduates.

Based on a study by the University of Akron’s Department of Economics, the average salary of private college graduates is $93,445 per year. On the other hand, the average annual salary of graduates of public colleges is $85,257.

So, in other words, individuals with a degree from private colleges make 8.7% more money a year.

Considering other figures, too, is important when determining the return on investment (ROI) in order to see the bigger picture. And one of those is student loan debt.

For instance, at the end of the first quarter of 2022, a total of 13.7 million students who went to private colleges owed $552.9 billion in federal loans — or $40,357.66 per student. Meanwhile, 25.3 million students who attended public colleges owed $705.7 billion in federal student loans — that’s equivalent to $27,893.28 per student.

When building a college list, make sure that you carefully weigh the pros and cons of attending a private college, especially in terms of the overall cost, financial aid and earning potential.

Top STEM Programs Have Additional Costs

Some colleges and universities are costlier than others because of high operating costs. Similarly, some degree programs are more expensive than the rest because they take more money to administer. Additional costs associated with facilities, materials and services can make a program costlier than usual.

Especially if on a tight budget, it’s not enough for high schoolers gearing up for college to consider the overall cost of going to the institutions of higher education of their preferences.

529 plan

It’s also a must for them to consider the cost associated with the degree program of their liking.

Operational cost — this is one of the reasons why colleges do not have the same asking prices. It’s also one of the main driving factors as to why different undergraduate degree programs charge degree-seeking students differently. More often than not, the priciest options are in-demand professional ones that pave the way for high-paying jobs.

Some bachelor’s degree programs that tend to wreak havoc on a low-income family’s savings include engineering, nursing, mathematics and various ones in the STEM and healthcare field.

Culinary arts is another undergraduate program known to have steep tuition and fees. That’s because students also have to pay for the various supplies they will need as they work on their degrees.

Also, culinary arts schools require a lot of money for them to be able to operate, what with the professional chefs they hire and kitchen appliances they need around.

Great Recession of 2007-2009 Caused Higher Ed Cuts

In 2007, the US housing bubble burst. And because everything is connected in the world of economics and finance, many others followed suit — various markets, banks, money-making enterprises, etc.

State governments also had to cut budget appropriations for public higher education.

Due to the fact that state-funded colleges and universities were receiving less money, they were left with no choice but to charge students more. And to make things worse for both first-time, first-year and returning students as well as their families, large tuition increases were not the only hurdles but also declining family incomes and property values.

In an attempt to put the matter under control after 2009, the federal government increased the maximum Pell Grant — from $4,310 to $5,550. It also expanded tax benefits to higher education and provided it with stimulus funding by means of the American Recovery and Reinvestment Act of 2009.

Since the academic year 2012 to 2013, fortunately, funding for public institutions has been increasing. However, the bad news is that the amount they have been getting has been lower than pre-recession (of 2007 to 2009) levels.

Inflation Plays Significant Part in Tuition Raise

The US, as of this writing, is said to be experiencing one of its highest inflation rates in the past 40 years.

Goods and services rising in cost and the purchasing power of money decreasing in value — this is what inflation is, simply put. From 1960 to 2021, the average inflation rate of the country was 3.8% per year.

When prices rise, it’s the consumers in the lower economic sphere that tend to suffer the most. And college students are included. That’s because institutions of higher education have no choice but to increase tuition costs since they have to pay more for labor, facilities, utilities and others.

But it’s not just college-bound and college-level students that inflation can punish.

An increase in tuition can cause the demand for higher education to decrease, too.

And if there are more instructors and staff members around than students, it’s not unlikely for colleges to cut payrolls and lay off employees. Schools themselves can close or merge in order to stay afloat — in the past 5 years, over 50 colleges shut down or merged.

Increase in Demand Allows Colleges to Raise Prices

It is said that a college education is the second-largest expenditure an individual is likely to make in his or her lifetime, right after purchasing a house.

And you would think that because higher education is in demand, the cost of getting one should be easy on the pocket. Well, it doesn’t work that way when it comes to earning a degree, especially these days.

High demand for higher education and competitive admissions processes are not a good mix. The more students flock to the same competitive schools, the steeper the tuition costs at those schools get.

There are only a few well-known elite colleges and universities in the country, which can limit competition. It’s exactly because of this why, instead of the usual decrease in cost when the demand is high, tuition costs increase — families are willing to do anything and everything to be able to pay for college, prompting schools to raise their asking prices.

Making matters worse are institutions shutting down or merging with one another — options decrease.

College Rankings Have a Direct Effect on Tuition

According to a study, about 25% of all top universities in the US make ranking high their explicit goal.

Spending a lot of cash on things that can help boost rankings proves just how important fame and prestige are to a lot of institutions of higher education.

Alas, this tends to come at a price in the form of increased college prices. One of the things most college ranking sites take into account when evaluating schools is the expenditure per student — the higher the expenditure, the better. However, they do not consider what they are shelling out cash for.

Because colleges can choose to spend more on facilities, maintenance and others and less on high-quality instruction for the sake of a #1 ranking, students end up paying more and more for education that’s less and less worthy.

In addition, many institutions attempt to improve their college rankings by focusing on getting high-achieving students, no matter the financial situation, to attend. This can cause some deserving low-income students to be left behind. The same can be said for some of those from minority backgrounds.

8 Steps to Bring Down College Cost of Attendance

This post would be incomplete if I only listed the reason why colleges are so expensive in the USA without providing tips to reduce their costs.

I wrote multiple posts on how to pay for higher education. The strategies are different for families with high income and low to medium income. But some general tactics I provided below.

Estimate Tuition Cost With Net Price Calculator

Each Title IV school, i.e. institutions that process U.S. federal student aid, must have a net price calculator published on their websites.

A net price calculator is a tool that allows families to estimate the cost of attendance based on income, assets, and some other options.

I recommend everyone to run the tool before applying to a college to avoid a situation when a student is accepted but their family cannot afford the cost.

Unfortunately, there is no one standard that dictates how the calculator is supposed to work, and each university is free to be more or less accurate with the estimates.

So, what should you do if are not sure about the accuracy of the net price calculator? Read the next tip.

Do Not Commit Before Receiving All Fin Aid Packages

Many students from high-income families know that acceptance rates in early decision rounds are higher than in regular decisions.

For example, when my daughter attended a meeting with a college admission office from our state flagship university, she was told that the school accepts 90% of students in Early Action.

While I always recommend students apply to Early Action, I don’t encourage everyone to apply to Early Decision schools.

The difference between EA and ED is that with ED you commit to going to school if they accept you, even if you get a better financial aid package from another college.

So, if money is a factor when choosing a college, avoid applying to ED schools. Instead apply in Early Action and Regular Decision rounds, collect all aid packages and compare.

Negotiate College Tuition

There are two ways to negotiate college tuition. First, by asking the admissions office for a discount on costs such as tuition, fees and on-campus housing. Second, by meeting with financial aid officers to appeal financial aid awards.

While both public and private colleges may offer discounted tuition upon request, it’s likelier for more private schools to give discounts for the simple fact that they can afford it.

In 2019, for instance, 366 private colleges gave discounts to 52.6% of first-time, first-year students.

Through successful negotiations, it’s possible to reduce tuition costs anywhere from 5% to 15%, depending on the college.

For instance, if you are paying $35,000 per year for tuition alone, you could enjoy savings between $1,750 and $5,250 annually. Throughout college, your savings could add up to as much as $21,000.

But before you make an appointment with the admissions office, prepare the necessary documents in order to make a strong case for why you should get a discount, like superb grades or low family income.

Other than the admissions officers, you may also meet with the financial aid officers at the college if you would like to appeal your financial aid award.

But you better act fast — the best time to attempt to ask for a higher award is as soon as you receive your financial aid award letter while the college still has said funds.

In most instances, writing a financial aid award appeal letter is how you go about this matter. Don’t forget to include documents that can support your request whether it’s need-based or merit-based.

Tip: Do not use the words “negotiation” and “appeal” when negotiating an aid package. Colleges do not like them. Instead, use the word “reconsider”, which sounds less salesy.

free tuition

Apply to Colleges With Free Tuition

Tuition makes up around 25% of an institution’s overall income. Needless to say, it’s an important part of the lifeblood of colleges, private and public alike.

Despite this, many US schools allow certain types of students to attend tuition-free.

Different institutions have different prerequisites for those who wish to attend without paying any tuition. For instance, at the University of Michigan – Dearborn, students need to have a high school GPA of at least 3.5 and come from a family whose income is $65,000 or below per year.

Being an in-state student is also a requirement among public colleges and institutions. Also, it’s not uncommon for free tuition to be good for only 8 semesters.

Numerous private schools offer free tuition, too — sometimes including other expenses such as books and room and board. Such is true at Princeton University for undergraduate students from families making not more than $65,000 per year. For the Class of 2025, for instance, each eligible student received $62,200 in total each.

It doesn’t mean, however, that you will be able to obtain a degree for free.

Tuition is only one of the various things that make up college costs. So, in other words, your family will still have to shoulder other expenses such as books, supplies, transportation and room and board.

But because tuition makes up about 40% of the total cost of college, higher education can become significantly more affordable through free tuition.

Apply to Colleges With Tuition Reset

When colleges and universities lower their published tuition, it’s referred to as a tuition reset. This is usually done when institutions believe they have priced the higher education they offer beyond their target market’s reach. It’s important to note that a tuition reset may also cause a reduction in financial aid.

Both private and public schools can reset their tuition costs. However, private ones tend to carry it out more often — after all, they have higher sticker prices than their state-funded counterparts.

A school can do a tuition reset as a result of its own research or by giving in to the demands of parents.

In 2013, Concordia University – St. Paul dropped its advertised tuition from $19,700 to $10,000 when both attendees and their parents called for college affordability.

On the other hand, in 2017, La Salle University lowered its sticker price to $28,800 from $40,400 in order to attract more students and make those who are already there stay.

Affordable college — clearly, this is the primary benefit of a tuition reset, especially among low-income students. However, it can also be accompanied by some downsides.

For instance, since students will pay less, it’s not unlikely for colleges to lower financial aid awards. A tuition reset is applicable not only to poor students but those from high-income backgrounds, too.

And, in some instances, only first-time, first-year students get to benefit from it, depending on the school’s policy.

Reduce Out-of-State Tuition With Reciprocity Programs

There are various reasons why some college-bound teens prefer to attend out-of-state schools.

For instance, some of them have a specific degree program in mind, while others would like a new environment or a fresh start. While there are benefits that come with being an out-of-state student, there is one drawback that’s simply hard to overlook. And it’s none other than tuition that’s higher than that for in-state students.

However, out-of-state tuition can be 2 to 3 times higher than in-state tuition, and here’s why:

Public colleges get much of their funding through taxes in-state residents pay. Because out-of-state students are from families that haven’t paid tax dollars to the state government, they are not eligible for tuition discounts as in-state students.

Fortunately for students whose preferred programs can come from out-of-state colleges, there are steps they may take in order to enjoy discounted tuition — sometimes as low as in-state tuition.

Here are some of the things you may give a try to bring down college costs as a non-resident student:

  • Look for state tuition reciprocity agreements. Some states in the same region have a formal agreement to allow students from different states to enjoy reduced or in-state tuition costs. Some states that do not participate in such a type of agreement include New York, New Jersey, Pennsylvania and Ohio.

Read more about states with tuition reciprocity agreements.

  • Attend a parent’s alma mater. Many public institutions of higher education offer discounted tuition to out-of-state residents whose parents, stepparents, legal guardians, grandparents and others graduated from them. However, in some instances, non-resident legacy students must maintain a certain GPA.
  • Obtain a merit-based fee waiver. To attract bright students residing elsewhere, some public colleges offer academically excellent applicants lower tuition rates. At the University of Georgia, for example, there is a particular type of waiver that covers 100% of the difference between out-of-state tuition and in-state tuition.
  • Submit a cultural diversity tuition waiver. There are some public colleges in the country that allow students from underrepresented backgrounds to enjoy a cultural diversity tuition waiver that can reduce tuition costs. North Dakota State University and Mayville State University are two of those that offer such.

Make Money in College to Pay off the COA

There are ways to reduce the costs if your student is already in school. For instance, students can apply for Resident Assistant (RA) positions and have room and board paid. Also, even college students can still apply for scholarships.

Read more about this and other tips here.

Consider These Alternatives to a 4-Year College

Earlier when we were talking about whether or not poor people can go to college, I mentioned that it’s not uncommon for low-income students to go to a 2-year college first before transferring to a 4-year school.

With a cheap associate degree, you are practically halfway toward a costly bachelor’s degree.

Besides going to a community college, you can also consider attending a trade or vocational school where the average cost of programs is around $33,000.

You may also try online courses, some of which come free of charge — optional verified certificates come with a price tag. Bootcamps are also popular these days.

But before you turn to alternatives to a bachelor’s degree program, explore college cost-lowering options first.

Filling out the FAFSA form and applying to outside scholarships can help cover some of the tuition and, in many instances, other college costs.

Doing good in high school and graduating with a high GPA and at or near the top of the class can increase your chances of getting generous merit-aid in college.

You may also take AP classes in high school in order to earn college credits.

Can Poor People Still Go to College: Some Sad Statistics

According to recent data, about 50% of all students from high-income families will have a bachelor’s degree by age 25. On the other hand, only around 10% of those from low-income families will.

Money: this is the primary reason why many poor people do not go to college.

Some of those who are able to may not finish — low-income students are twice as likely to drop out as high-income students. But just because a student is from a low-income background doesn’t necessarily mean that he or she should quit dreaming about earning a college degree for better employment and earning opportunities.

tuition assistance

Although it’s true that poor high school students are less likely to go to college, the accessibility of higher education in various states gives them the opportunity to change their lives for the better. In California, for instance, a greater percentage of low-income students attend college compared to the average in other states (67% vs. 58%).

The enrollment gap between low- and high-income college attendees, meanwhile, is lower (21% vs. 31%).

According to another survey by Intelligent.com, around 34% of young adults were not enrolled in college because they couldn’t afford it. On the other hand, 29% said college is a waste of money. The same survey found out that 51% of those who recently graduated from high school never attended college.

Cost is the biggest reason why a lot of high school graduates omit getting a college degree from their bucket list.

Experts from NORC at the University of Chicago, in fact, say that as much as 75% of Americans believe that students do not attend college because they cannot afford it.

The independent research institution also found out that an individual’s experience with higher education can shape his or her opinion about college costs. For instance, concerns about the cost being the main obstacle increased with their educational attainment — 58% for those without a high school diploma and 81% for those with a degree.

Each year in the US, over 1 million college students drop out. And among those who quit, up to 70% admitted that money was the primary reason for such.

In the last couple of years, more than 100 prestigious institutions have worked with philanthropies-funded initiatives upon realizing that paying for tuition costs was not the primary problem but shouldering something else associated with higher education. For many degree-seeking students, the main problem is staying in college, not getting in.

Other Resources

There is no denying that college costs have drastically increased in the past 20 years. But the fact remains that earning a bachelor’s degree is, according to statistics, the secret to higher-paying jobs and more satisfying careers.

Don’t let the sticker price intimidate you — most college students pay less.

Above, we talked about the many different reasons why college costs a lot. But we also discussed things that can make it friendlier on a low-income family’s budget.

There are many other resources you can find on this site. Here’s the list of some most useful ones:

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily represent those of the College Reality Check.

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