College Cost Break Down: Why College is So Expensive? Part Two (Page 4)

Current Cost Pressures on Colleges and Universities – Or Why Your College Tuition Continues to Rise

The income streams to a public college or university are9: tuition and fees, gifts, government support, endowment, grants, and intellectual property revenue streams from technology or drug patents. Any decrease in one of these income categories can hit a college hard; it just doesn’t have the institutional flexibility to easily modify its expenses or sell “new” products to shift with changing economic realities. When you combine institutional inflexibility with reduced state funding for public colleges and universities, you can see why it’s tempting to raise tuition and fees – tuition is one source of funding that colleges do have control over.

Contributing to the cost pressure on colleges and universities is the fact that college enrollment and demand for a college education continue to rise. In fact, enrollment at degree-granting institutions between 2000 and 2010 grew by over 37% to 21 million students10.  More students means more expense, from increased infrastructure usage, to increased demand for classes (and therefore the need for more faculty to teach those classes).  

The Rise of Financial Aid and Student Loan Debt

How do colleges handle rising costs? They increase the cost of tuition and fees, realizing that the majority of students don’t pay the sticker price for college, but rather rely on financial aid (in the form of scholarships, grants and loans) to cover the costs of college. This in turn places pressure on the federal financial aid and student loan system to increase a student’s eligibility to borrow more money to pay rising tuition fees.  It has become a vicious cycle with terrible economic consequences for students including increasing defaults on student loans.

After all, an increase in tuition doesn’t all of a sudden increase your ability to pay for college – what it increases is the amount of federal financial aid you will need to cover any gap between your ability to pay (as defined by FAFSA) and the increased tuition due. What this means is an increased reliance on loans in order to earn a college degree, and in turn, an increased student debt load upon graduation – the effects of which can be financially devastating to someone just entering, returning to, or retraining while in the workforce.

The rising cost of college can be blamed on basic math. College expenses are on the rise. College incomes are on the decline. Students, unfortunately, are the ones being asked to take up the slack, possibly sacrificing their financial future to do so. It’s a classic Catch-22. If you don’t have a college degree and/or the appropriate credentialing and training, you will have a tough time finding a job and might remain in financial distress. If you do earn your college degree, and aren’t mindful of the cost of college, you may still be in financial distress. 

In spite of the rising cost of college, in today’s competitive workforce and economic climate, a college degree remains a wise investment – just be smart and flexible in how it is you go about earning college credits, financing your education, and determining which school to get your degree from that will best serve your career aspirations upon graduation. 

9Dickeson, Robert, The Secretary of Education’s Commission on the Future of Higher Education, Issue Paper, Frequently Asked Questions About College Costs, p. 4

10National Center for Educational Statistics, Fast Facts: Enrollment, 2012, p.1