Here's where tuition is growing the fastest, and why.
What is college?
"College" is a catch-all term for education undertaken after high school but before a graduate or professional degree program. This can take a lot of different forms, most notably four-year bachelor’s programs and two-year associate’s degrees. It can be offered at research universities, liberal arts institutions, universities that don’t conduct research, community colleges, conservatories and art schools, etc.
Pop culture and the media paint a misleading picture about college, as most students don’t take part in the four-year residential experience depicted in movies and television shows. In fall 2013, only 45.2 percent of undergraduates were full-time students in four-year degree programs. A majority of students are either attending part-time, studying for two-year degrees, or both.
Has college really gotten more expensive? How much more expensive?
Yes, it is. In the 1963-64 school year, the average annual cost of attending a four-year public college full-time — including tuition, fees, room, and board — was $6,966 in 2012-2013 dollars. By 2012-2013, that had more than doubled to $17,474. The increase at private schools was even greater, growing from $13,575 to $35,074 in 2012-2013 dollars.
Are all forms of college seeing equally big increases in tuition?
Nope. Private schools have seen slightly bigger price spikes over the long run, with the total cost of attendance growing 158.4 percent between the 1963-64 and 2012-2013 school years, compared to a 150.8 percent hike in public school prices, after inflation.
The trends vary a lot between different types of public and private schools as well, according to the Delta Cost Project. Between 1987 and 2010, net tuition revenue per full-time student at public research universities like Rutgers or the University of California system grew about 136.7 percent. At public community colleges, it grew 103.9 percent; at public bachelor’s schools (institutions offering bachelor’s degrees without being research institutions), 132.7 percent; at public master’s schools (like public bachelor’s schools but with a master’s as the top degree), 138.8 percent. Private schools have seen smaller increases more recently (from 1987 onward), albeit from a higher base.
Are all kinds of students seeing equally big increases in tuition?
Colleges have tried hard to concentrate the tuition increases among richer students. Demos's Matt Bruenig, analyzing College Board data, found that between 1992 and 2007, the poorest quarter of college students saw their total cost of attendance (after financial aid) grow a mere 3.4 percent, compared to a 24.4 percent increase for students in the richest quarter.
These numbers end before the financial crisis begins, and because the financial crisis wrecked state budgets and led to sharp tuition increases, it’s possible that more recent data would show a different story. But prior to 2007, at least, public colleges were sparing poor students from the steepest of tuition hikes, in large part due to need-based financial aid.
Why are public colleges and universities becoming more expensive?
That’s a tricky question. Colleges might be raising tuition because they’re spending more on professor salaries — or, in some cases, on amenities like climbing walls. But they also might be raising tuition because they’re getting less revenue from non-tuition sources.
Lower non-tuition revenue is the story for most public colleges, where state budget cuts have forced sharp increases in tuition. You can see this by comparing how much the schools spent on each student with how much revenue they get from the state for each student. At community colleges, the amount spent per student actually fell between 2000 and 2010, while tuition continued to rise. The reason is that state governments cut funding for public colleges and the schools had to make up the difference by cutting spending and increasing tuition. A similar thing happened at public bachelor’s and master’s schools — which include all non-research institutions offering a bachelor or master’s as their highest degree, respectively — where spending per student stayed basically constant, but tuition rose to make up for budget cuts.
Public research universities like Purdue or Auburn are a totally different story. There, spending per student grew even faster than tuition and other costs of attendance did. There are a lot of theories behind what’s driving that spending increase and the tuition hikes that have come along with it, most of which focus either on organizational dysfunction within universities or broader economic forces which push up the wages of college professors and put the squeeze on university budgets.
Why are private colleges and universities becoming more expensive?
Like their public counterparts, private research universities like University of Chicago or NYU saw spending per student grow even faster than tuition and other costs of attendance did. Why exactly that happened is a matter of considerable dispute among higher education economists.
Private liberal arts colleges like Reed or Swarthmore, however, are raising tuition both to compensate for losing non-tuition revenue and to pay for new spending. They're raising tuition more than they're raising spending, so the tuition increases are partly fueling the spending increase (as with research universities) and partly offsetting reductions in non-tuition revenue.
Do we know why some schools are spending more per student?
Not for sure, but we do have some theories!
One theory — the "Baumol cost disease" hypothesis — argues that schools have to compete with the private sector for talented professors, and thus wind up having to raise salaries beyond what they’d normally pay, which in turn raises spending and tuition. Spending increases drive price increases, in other words.
Another theory, the "Bowen" hypothesis, argues the opposite: schools are always looking for ways to increase revenue and the non-profit nature of most schools means they tend to spend up that revenue whether they need it or not. Tuition increases drive spending increases, in other words.
The debate between the two is not settled by any means, and you’ll find experts passionately arguing for each side.
How does tuition compare at for-profit schools?
Not well — and it seems that students get less in exchange. For-profits are much more expensive than equivalent public colleges, with bachelor's programs costing about 20 percent more on average, and associate's programs costing about four times as much. Nearly all (96 percent) for-profit students end up borrowing money, more than double the share of public four-year students who do. The sector's defenders note that for-profit students are usually less well-off than traditional college student, and so it would make sense for them to borrow more.
Despite paying a premium, most for-profit students don't even finish their degrees. A report from Senate Health, Education, Labor, and Pensions (HELP) committee chair Tom Harkin (D-Ia.) found that 62.9 percent of associate's students, 54.3 percent of bachelor's students, and 38.5 percent of certificate students at for-profit colleges dropped out before completing their program. For those students who do graduate, a degree from a for-profit school fails produce any earning bump, unlike a degree from most other colleges, according to preliminary research.
The poor results make sense if you look at where for-profits actually spend the tuition they rake in. Only 17.2 percent of for-profit spending goes to instruction, and 22.7 percent goes to marketing. For-profit schools like to counter this figure by noting that non-profits do a lot of unofficial marketing — e.g. through their sports programs.
What kind of college do most students attend?
Public colleges and universities dwarf private ones in terms of enrollment. In fall 2012, about 13.5 million people attended four- or two-year undergraduate programs at public institutions. Compare that to the 2.8 million who attended those programs at private schools and the 1.6 million who attended them at for-profits.
Importantly, a very large number of students (37.9 percent) attend part-time. Two-year colleges are also a bigger part of picture than they’re often painted as, since they include 40 percent of all undergraduates and 23.3 percent of all full-time undergraduates.
One last thing — in case you thought that competitive undergraduate admissions were a big deal for a lot of students, disabuse yourself of that notion. The vast majority of college admit two-thirds or more of their students, according to the National Center for Education Statistics (see page 143 here).
What does the higher cost of college mean for student debt?
More expensive tuition means higher debt burdens for students. According to data from the New America Foundation, the average indebted bachelor's degree completer borrowed a total of $21,990 (2012 dollars) in 2003-04, for a monthly payment of $233 (usually repaid over ten years, starting six months after graduation). In 2011-2012, that figure had risen to $29,384 and a monthly payment of $312. In less than a decade, the typical monthly payment had gone up nearly 34 percent, around the size as the increase in tuition over that period.
And both government-issued loans and private student loans can’t be knocked out during bankruptcy (unlike, say, credit card debt or mortgage debt), so that majority will be paying off their $29,384 plus interest, come hell or high water.
I heard you can get lower student loan payments if you’re in a low-paying job, or go into public service. Is that true?
Yes. The Department of Education has an array of programs — called, depending on the target beneficiaries, "Pay as You Earn," "Income-Based Repayment," "Income-Contingent Repayment," or "Income-Sensitive Repayment" — that let borrowers pay back loans by contributing a set percentage of their income, rather than by paying back a set amount every month over the course of a decade-long "repayment period."
For example, "Pay as You Earn" lets post-2007 borrowers pay 10 percent of their disposable income every month instead of a set amount. The loan is forgiven after 20 years if it still hasn’t been paid off — and after 10 years for people in public-service careers (including any job in government or at a 501(c)3 non-profit).
You can see if you qualify for one of these programs by using our interactive quiz here.
Is going to college still worth it?
For the vast majority of students, yes, yes, it is.
The reason is that people who go to college, even if they don’t graduate, make significantly more money than people who don’t attend. College graduates make, on average, roughly $30,000 more a year than high-school graduates who never went to college, according to the Hamilton Project’s calculations. That adds up to an income boost of over $500,000 more over the course of a lifetime. People who attend but don’t graduate from college make about $8,000 more a year than high school grads who didn’t go to college, which adds up to more than $100,000 extra over a lifetime.
Do we know that college actually causes people to earn more? Maybe college students were just going to make more anyway!
We do, at least as much we can know anything about this sort of question.
For example, a number of studies have been conducted comparing the incomes of twins with different levels of schooling, which have found that someone who went to school a year longer than their twin generally makes 12 to 16 percent more. Since twins share much of their DNA and had similar upbringings, it’s easier to attribute that boost to education than it is when you’re comparing people with radically different DNA and family backgrounds. A randomized study of the vocational education program Job Corps also found that education boosts incomes, as have sundry other studies looking at everything from the Vietnam draft to the Canadian GI bill.
If you compare the returns on college to the returns on normal investments like stocks, bonds, or real estate, it dwarfs them. The Hamilton Project estimates that the annual rate of return on a bachelor’s degree is about 15 percent, and the return on attending but not finishing college is 9.1 percent. The return on stocks, by contrast, is around 6 percent, and the return on government bonds is around 2 percent.
Will online learning stop tuition from rising?
Maybe? The basic promise of MOOCs — short for Massively Open Online Courses — is that they allow one instructor or set of instructors to reach tens if not hundreds of thousands of students at once, far surpassing the abilities of even the largest lecture halls on college and university campuses. That could make providing college-level instruction dramatically cheaper. What’s more, MOOC proponents argue they could enable better competition between professors. If the University of Michigan has a mediocre introductory chemistry lecturer and Michigan State has a fantastic one, it isn’t easy for students to switch from the former to the latter. But if both lecture courses are online, students can easily switch between them, creating pressure on professors to continuously improve their courses, and enabling all students access to the best set of lectures available.
The findings of experimental tests of online education are quite positive. A Department of Education meta-analysis found that "students in online conditions performed modestly better, on average, than those learning the same material through traditional face-to-face instruction."
What are some drawbacks of MOOCs, besides the inherent dangers in giving the robots more power?
There are things about the in-person college experience that aren’t so easily replicable online. Classes aren't the only way college students learn, after all. They also debate, discuss, and learn from their fellow students, activities that are inherently tougher to do remotely. The effect these interactions have on student learning is significant. Dartmouth's Bruce Sacerdote used the randomized process that school uses to assign freshman roommates to see how having a roommate with good grades affects students. He found that a one-point increase in a student's GPA is associated with a 0.11-point increase in her roommate's GPA. Similar studies at Williams College and the US Air Force Academy also found strong roommate effects on GPAs.
And MOOCs faced a huge setback after a failed trial at San Jose State, where the MOOC provider Udacity was brought in to offer courses, which students proceeded to fail in greater numbers than students in traditional classes. The experiment was cancelled and prompted worries that low-performing students whom MOOCs are likeliest to target are also least likely to be able to succeed in an online environment without extensive support systems.
Are there non-online experiments with higher ed I should know about?
Yes, there are! Most of them have to do with what’s called "competency-based learning." The idea is that instead of structuring colleges around "credit hours" — that is, around how much time people are spending in the classroom — we should structure them around helping students attain certain competencies. At Southern New Hampshire University, a national leader in competency-based degrees, "competency goals" fall into categories like "critical and creative thinking" and "digital fluency and information literacy." If a student completes assignments that satisfy all 120 competency goals, then he receives an associate’s degree. The program is online and self-paced, with the school’s first graduate completing his degree in about three months.
The hope is that competency-based learning will both tie progress in college more closely to actual learning, and that it will help students deterred by the high cost and length of traditional colleges to succeed. Competency-based programs generally charge by the term, and let you do as much work as you want within that term, so students can speed up their pace and save lots of money in the process.
Critics of competency-based education, however, counter that there aren’t enough students capable of that kind of acceleration to make it worthwhile, and that the programs could enable students to skip valuable instruction they would have received in a more traditional program.
What should I read next about rising college costs?
So many things! Here are a few to start with, though:
- Princeton economist Cecilia Rouse summarizes the evidence that college is worth it.
- Economists Michael Greenstone and Adam Looney (now at Chicago and Treasury, respectively) on why college is worth it even if you drop out.
- Education Sector's Andrew Gillen on the role of government aid in rising college costs.
- William & Mary economists Robert Archibald and David Feldman present their theory of why college is getting pricier.
- Education journalist Anya Kamenetz on how to make bachelor’s degrees cost only $10,000.
- Kevin Carey, director of the New America Foundation's education program, on taking a MOOC at MIT and why it convinced him that online courses are going to make it big.
- Why Google engineer and former Stanford professor Sebastian Thrun, who started the MOOC provider Udacity, has soured on online education.
- "The Tuition is Too Damn High," a much longer take by me on this topic.