The average American saved $5,011 last year. That means it would take about 75 years to accumulate enough cash to send a child to a top American university.
College is really expensive. And prices just keep going up.
Average U.S. private college tuition increased about 4% last year to just under $40,000 a year, according to data compiled by U.S. News & World Report. For in-state public schools, that cost is $10,500, representing an annual increase of 0.8% for in-state students and about 1% for out-of-state students.
However, for highly rated and select schools, prices go up significantly. Harvard University charges undergraduates $57,246 in tuition and fees annually. Add in housing, food, books, and other living expenses, and you’ll likely need to pay about $95,438 each year, according to Harvard University.
It wasn’t always like this. After adjusting for currency inflation, college tuition has increased 747.8% since 1963, according to a study by the Education Data Initiative.
And between 1980 and 2020, the average price of tuition, fees, room and board for a bachelor’s degree rose 169%, according to a report by the Center for Education and Workforce at Georgetown University.
This far exceeds wage growth.
Over the same 40-year period, workers between the ages of 22 and 27 earned only 19% more, according to the report.
A Gallup poll released this week may explain why Americans’ confidence in higher education is at an all-time low. A June poll found that only 36% of Americans are confident about higher education, down more than 20 percentage points from eight years ago.
“Gallup has not explored the reasons behind the recent drop in confidence, but rising higher education costs likely play a role,” said Megan Brennan, a Gallup research consultant. said.
So why is college tuition rising so rapidly?
high cost of human teachers
Katherine Hill, an economist at the educational nonprofit Ithaca S&R and former president of Vassar College, says hiring professors is expensive.
“Higher education is produced primarily by skilled workers – teachers and administrators,” she says. “Their prices in the economy have risen.”
Real wages for skilled workers in the United States have outpaced inflation by several percentage points for a long time, but other industries are reducing those labor costs through productivity improvements such as AI and robotics that reduce reliance on skilled workers. I was able to offset it.
But there aren’t that many robots teaching college classes. That still requires professors with expensive degrees.
“We’re doing higher education pretty much as we’ve always done, which means that faculty are in front of classes of 20 to 40 students,” Hill said. “That means we’re not seeing efficiency gains to reduce that cost.”
To save costs, some universities are placing more emphasis on non-tenure-track contingent faculty, who are underpaid and lack access to employer benefits. According to the National Education Association, the higher education system is increasingly dependent on this casual labor. As of fall 2021, nearly 70% of U.S. faculty will be working part-time, up from 47% in 1987.
Competition for the richest families drives up costs
Income inequality in the United States has widened significantly since the 1970s, and today there is a much greater gap between the rich and the average earner.
The top 10% of Americans will own nearly 70% of America’s wealth in 2021, up from about 61% at the end of 1989, according to the Council on Foreign Relations. The top 1% of Americans now earn 21% of all US income, according to the Economic Policy Institute.
That means top-ranked colleges can charge as they please, and wealthy families willing and able to pay each year will be found.
“The flagship schools are competing for talented students and families who can pay full price,” Hill said. Because these families “have no trouble writing checks,” they are willing to spend more in exchange for luxurious services and well-maintained campuses. “They want small classes, they want nice dorms, they want good food,” Hill said.
Even if schools cut spending and try to cut these facilities, “ultimately, they won’t be able to attract those students,” she says.
Universities are now spending more on administrative services and luxuries than they did in the past, according to a recent study by the US Trustees and Alumni Council. Between 2010 and 2018, this type of spending increased by 29%, while spending on educational staff increased by 17%.
Decrease in state subsidies
State legislatures also spend less on public education than they used to.
A recent NEA analysis found that state funding for higher education declined by an average of 6% in 37 states from 2020 to 2021. “This means that universities must rely on students to pay their tuition fees, and students are in debt to do so,” the NEA wrote in its report.
Many qualified students at the nation’s top universities receive substantial financial aid and other grants that ultimately reduce the cost of their degrees. However, not everyone can benefit from financial aid and other subsidies.
college net price
Yes, sticker prices are increasing. But the net price of college, or what students and their families are actually paying, is declining.
The average student at a private four-year college spent $32,800 last year on tuition, room and food. Adjusted for inflation, the actual fees paid to private colleges have fallen 11% over the past five years, according to College Board data.
For public universities, net prices averaged just over $19,000, down 13% over the past five years.
“This kind of debate about whether this ‘college cost sickness’ is likely to continue 50 years ago, people were like, ‘Oh, it’s not going to be over $30,000.’ “It’s not going to be over $40,000,” Hill said.
“In some ways, if incomes continue to grow as they have been, I think they will continue to do so for some time.”
Adjusted for inflation, the average student loan debt at graduation has increased 2,807% since 1970, according to the EDI. Even adjusted for inflation, average debt increased by 317%.
Student debt explodes
Late last month, the Supreme Court ran into trouble with President Joe Biden’s student loan forgiveness program, preventing millions of borrowers from getting federal student debt relief of up to $20,000 in federal student loans. It came months before student loan payments resumed after a year-long hiatus.
The Biden administration announced on Friday that it will cancel debt of 804,000 borrowers totaling $39 billion in the coming weeks.
The US loan balance is about $1.6 trillion.