Learning Curves Topic
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Learning Curves
March 28, 2019

High-Cost Higher Ed: College in the 21st Century

MHT Partners  | Education Investment Bank

Parents and students beware: tuition has increased yet again! In what has become a rather predictable pattern since the 1980s, the sticker price for average tuition in the United States has increased faster than the rate of inflation. Weighing in at an average of $19,189 for public, four-year universities and $39,529 for private universities (including fees and board) (1), the annual cost of attending a four-year university has reached new heights – and with it, student loan debt. As a result, many students and families are having to decide between getting a degree and facing decades of debt payments after they graduate.

According to the National Center for Education Statistics, average tuition across all four-year institutions totaled $26,120 per year for the 2015-2016 academic school year, bringing total costs to a whopping $104,480 over four years. The equivalent cost of a four-year degree for the academic year ending 1996 would have totaled just $41,320. This means that the cost of college attendance more than doubled after inflation. To put those numbers into perspective, the cost of attending Harvard in 1988 totaled only $17,100 per annum. Today, Harvard students pay more than two and a half times that amount, for a total of $46,340 for the cost of tuition alone – a 171% increase over 20 years (2). If that doesn’t faze you, try tacking on another $20,000 for room and board, books, and other miscellaneous fees and expenses.

As the discrepancy between rising tuition and stagnating wages continues to broaden, it is becoming increasingly difficult for graduates to make a living and/or save for retirement and virtually impossible for students to work away their debt before graduating. Currently amounting to over $1.5 trillion, student loans represent the highest non-housing consumer debt category in the U.S. – even more than auto or credit card loans. Interestingly, the availability of student loans has created somewhat of a paradox that has fueled increases in tuition: while students otherwise unable to afford the cost of college are able to take on large amounts of debt to fund their degrees, the lack of a cap on federal aid has artificially inflated demand for higher education. Additionally, demand for higher education has also continued to increase despite decreasing government funding to support college growth. Since 2008, 44 states have decreased their funding for higher education for a total of almost $9 billion, with 18 states having reduced funding by 20% or more (3).

While attending a higher education institution is often considered the logical next step towards a long and successful career, the current price tag on a college degree has forced many students to consider alternative pathways. Additionally, students planning to attend graduate school will need to be even more thoughtful and definitive about their plans for undergraduate education. That said, there is still hope for the future for students and parents on a budget. Students seeking a more reasonably priced education may consider pursuing a degree at a public university, which charges over $20,000 less on average than a private university. Furthermore, the advancement of online courses has introduced a number of opportunities in what is otherwise a very expensive and relatively stagnant higher educational environment. Though brick and mortar institutions will likely never disappear completely, there is no question that current tuition trends are not sustainable; as the needs of students and the economy change, so too must the educational system.

1 National Center for Education Statistics: “Tuition costs of colleges and universities”
2 CNBC: “Here’s how much more expensive it is for you to go to college than it was for your parents”
3 Center of Budget and Policy Priorities: “A Lost Decade in Higher Education Funding”

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