Why Is College So Expensive?

Current and prospective college students might not fully understand just how much a college degree is going to cost them, but recent college graduates sure do.

According to recent studies, the average student graduates with about $24,000 dollars worth of student loan debt, and Americans are now in more debt due to student loans than due to credit cards.  College costs for students continue to rise at a rate multiple times the cost of living increases experienced by the average American. Attending college is becoming more and more financially challenging for middle class Americans.

But why do colleges and universities charge so much?  And can anything be done to reverse the trend?

Below you will find several basic possible reasons behind the ever-increasing cost of a college degree:

1. The side effect of Federal student aid.

Federal student aid, while a necessity for many talented individuals who otherwise might not have been able to finance their college educations, could actually be contributing to the problem of rising tuition costs.  There are two major reasons for this.  First, easy access to federal student aid causes students to ignore the numbers in front of them.  Knowing that another party is financing their bill makes students less concerned about the price tag, and, if students do not protest tuition prices, what incentive do university administrators have to lower them?

Secondly, federal student aid has risen steadily over the years in order to keep up with college admission prices.  The goal of these aid programs is simple: to reduce the cost of college for students.  However, as aid amounts have increased, so too have tuition costs, effectively negating the benefits of increasing federal aid.  Colleges and universities know that they can raise their prices and that students will still attend – in part because the government is handing them money.

2. A college degree is perceived as a necessity.

older student in college struggling to raise needed cashIn today’s job market, a college degree is widely considered to be a necessity, even in many professions where it was once considered superfluous.  This has contributed to an increase in students attending college to prepare for professions where they do not necessarily need degrees.  Colleges are well aware of public opinion regarding college degrees, so they are also aware that they can set tuition almost as high as they’d like and still attract a sizeable student body.  To combat this problem, American students would need to seriously reevaluate their life paths and decide whether they truly need a college degree in order to pursue their desired career.  Professional, vocational, or technical training should be viewed as a viable alternative to a four-year degree, not a less worthy undertaking (as it is viewed by many now).

 3. Colleges do not see students as their customers.

Partly because college administrators know that their product is in high demand and is guaranteed to sell at virtually any price, they sometimes view student attendance as an inevitability.  Therefore, some schools tend to focus more on the demands and needs of their professors, alumni, investors, and other important “customers” rather than the needs of their students.  Expensive athletic programs (supposedly benefiting alumni more than students), trustees’ whims, and professors’ demands are just a few examples of ways that educational institutions have been known to cater to the needs of their customers at the expense of their students.

4. Peer pressure is powerful.

As one college increases its rates, a competing “classy” school follows suit and raises its rates accordingly. The domino effect is copied throughout the nation as school administrators feel the next rate increase is justified since neighboring institutions have already jumped onto the bandwagon. Colleges that keep rates intentionally low are quickly viewed as sub-par by other schools and may run the long term risk of devaluing the worth of education received through their brand.

5. Student acquisition costs are skyrocketing.

Amidst all the criticism for nonsensical increases in the cost of American college education, one final point is worth noting. The cost for acquiring an individual student at an American college is rapidly increasing. Each year, new for profit colleges are created while other similar institutions rapidly expand. These for profit colleges directly compete for students with the historic US universities, state institutions, private colleges and community colleges.  The annual increase in student openings at American colleges far exceeds the annual increase in the number of students entering colleges. American colleges find themselves forced to target adults and pressure them into beginning or returning to college in order to create a continuing yet non sustainable student population growth.

Out of desperation, colleges pay $35 or more merely for a new prospective student’s contact information. A long food chain of marketing firms and affiliates then take advantage of this desperation by using traditional and nontraditional techniques to lure unsuspecting individuals into submitting their personal information which is then sold to these colleges. Many of these contacts prove to be worthless, but only after a college spends in excess of $50 per contact through phone calls and promotional mailings as well as hefty payments to those who obtained the prospective student’s personal information.

As college student recruitment and admissions offices fork over hundreds of thousands of dollars each year to obtain enough students to keep their schools operational, that escalating student acquisition cost contributes directly to the tuition costs that wildly continue to increase to levels an average American family will soon find unfathomable.

What can be done?

We invite our readers to share their thoughts into what can be done to salvage the American higher educational system before it is too late.

This article originally was posted in December of 2011, but it is just as relevant today, and the average amount of student debt upon graduation is inevitably only increasing.

About Andrew Jensen

Andrew Jensen, a business growth, efficiency & marketing consultant, provides business advisory services for clients in the Baltimore; Washington, D.C.; York, Hanover, Lancaster & Harrisburg, PA regions. Andrew advises regarding business growth, productivity, efficiency, business startups, customer service, and online/offline marketing. Follow Andrew on Google+

Comments

  1. Sanjay Kumar says:

    High competition in higher education leads to skyrocketing student acquisition cost and cost of building opinion for students & parents before paying for fee. Students and parents evaluating the value of degree and need evidence of successful ROI before signing off for a college. And counseling session by colleges do not support this, they rather need public opinion.

    Colleges across the world are increasingly assessed on the success of their alumni and a closely embedded alumni network can help build positive opinion about the college and reduce the cost and effort in signing up the new recruitment. Also, alumni and students can play a crucial role in enrollments and counseling, marketing by students and alumni pays higher dividend than the traditional marketing techniques.

    Globally colleges perceive alumni as a source of donation. But alumni can provide tangible benefits to colleges and reduce cost in areas like new enrollments and corporate relations. An engaged and active alumni network with average 30% alumni in management roles can easy:
    1. reduce cost of acquisition by 30%
    2. reduce cost of corporate relations by 60%.

    Hope above information will give the audience new perspective.

  2. Fees is high because students needs college more than college needs students

  3. Braden Bills says:

    I think it makes sense that colleges are so expensive. They’re practically necessary in this modern market! You need to have some kind of degree!

  4. Absolute nonsense! Contradicting yourself: if colleges don’t see students as customers why do they spend ridiculous amount of money on acquiring leads!!!???

  5. In all the articles I have found online about why college is so expense, none address the college’s overhead and capital projects (luxury student housing, sports arenas), which the college increases in order to attract students. Still, the non-education related expenses have to be funded somehow, and that will be reflected in the cost of tuition. Why has no one examined the actual cost per student (which seems out of control) rather than simply how students are funding their education?

    • Umm… The majority of these things are paid for thru programs such as football, baseball etc that you mention In sports area. I work in DC and have for over 20+ yrs, in these yrs u have entered GW, GT, Catholic U, Trinity, and America U to name a few and have yet to see these “luxury student hosing” as you stated. Profit margins on a whole are Avg. Around 20% or highest on a national standard. If you are business savvy, then you should know that this type of profit margin, is extremely high. There isn’t many private companies that have that high of a return. So your statement of its justified. Another fact is peer pressure of big names schools raising fees and other feeling compelled to raise theirs as well or they might be seen as a lesser college.

  6. Rose Amblood says:

    As a student, I am doing a research project. After reading your article, I am confused. Are you for or against free college education?

    • Nelson Walker says:

      Free college is a myth unless college is going to be somewhat free for top performing students seeking STEM degrees or needs based professional degrees. I doubt anyone will get free college for a General Studies or Liberal Arts degree.

  7. There is not “free”. The money has to come from somewhere and it comes from income, sales or corporate taxes. Free will only lead to continued cost growth. When these is no transparency or concern about cost to the actual consumer of the service, then we have cost growth. Look at healthcare

  8. Rosmarie Spielvogel says:

    In Austria (Europe), colleges are for free for all born Austrians until the age of 26 years as long as you don’t chose a private college. If you move from another country to attend college in Austria, you’re charges approximately 450 dollars per semester (= around 900 dollars a year) excluding books and materials, you will need for the courses.
    The education takes three to five years (or longer in case you study medics or law, which both need further education to specialize in a certain field).

    Mostly, students have to take an access test, which differs according to the education, which you want to do, to be allowed to attend college. If you fail, you have to wait for one year and can try to pass the test the year after, or start to work and let go of your plan regarding college education.

    There are no scholarships for sporties or other talents. The only public scholarship offered is for people, whose parents earn too little to afford college materials for their kids AND scholarship for grown-ups younger than 32 years, who have been working more than 6 years full-time.

    Private colleges have a great advantage: not 1.000 students in one class, but 25 – 50 students. So, classes are supercosy and teachers are able to take care of each of their students individually.
    The disadvantage is: Many people do the theoretic test, the practical test and the interview, but only 25 – 125 places are free per year. Also, the fees are – for Austrians – tremendously high: Starting at 1,400 dollars per semester (2,800 dollars a year) amounting to 15,000 dollars a semester (30,000 dollars a year) for 1 to 5 years of education is not affordable for middle- or low class people.

    Either, you take a loan (there’s a tendency to do so) or you go to public colleges, which cost peanuts – or you have parents, who have enough money to pay for private colleges.

    You can get nicely-paid jobs without college degree though! If you start after highschool (18 years old) or middle-school (15 years old), you can gain so much work experience that you are able to “slip” into high positions as time goes by.

    There is always a place to work, and there are minimum wages (you get for fulltime work, which is appr. 40 hours a week) 800 dollars, BUT renting a 40 square metre appartment only costs you 450 dollars per month!! So totally affordable.

    If you earn less, the employer is in serious trouble, plus you get a payment by the state to reach mimimum wage.

  9. Columbia says:

    Women need to have their children in their 20s.
    Babies need a stay-at-home breastfeeder for at least a year.
    And it is easy to convince the population otherwise.
    I was talking to an elderly woman the other day so excited that her grandson’s girlfriend, age 28, was earning “$20 an hour helping with autistic children 15 hours a week”.
    The elderly woman has been brainwashed by the MSM that a good catch for her grandkid is a woman getting endless degrees, using up her 20’s, instead of delivering healthy great-grandkids.
    The “catch” intends to continue her Psychology studies until she has a doctorate. She has $35,000 in debt and climbing.
    I said “she needs to have babies with your grandson now.” She replied as if that was a silly suggestion.
    Who convinced a grandma that degrees and debt are better than grandchildren?
    The University PR industry, I guess.

  10. Jeremy, Sr, Software Engineer, no degree says:

    Here’s what I think we’ve lost sight of in this country. College/University level education is just that, education. Education is the process of transferring knowledge and skill from one group to another, professor to student. She success of such endeavors is measured by the student’s knowledge and skill at the end of the educational period, and the student’s ability to apply those the knowledge and skill they learned in real world applications, usually through employment or successful entrepreneurship.

    What the United States has done is turned the educational process into a business, with investor interests seeking growth year after year. Success indicators are no longer measured by student merit and reasonable wage employment (since I personally know many college grads accepting career related jobs at $12.50 per hour) but rather by the revenue gained by the college institutions. This model is counter intuitive to the perception we have of American university level education. In sort, it’s about money, not knowledge and skill.

    To solve this problem, we need to return to the knowledge and merit expectations of our universities, and remove all financial interests by the public. No more financial investing in education. And, why do we spend such and exorbitant amount of money financing college level sports? If a student seeks education in technology or medicine, why are sports necessary to achieve that goal? While I believe physical fitness is very important, it should not be provided as such an extreme expense to the students.

    So, to sum up, we need to return to basic knowledge driven education, and get rid of external financial interests. Only then will the cost of education return to acceptable levels in today’s economy.

  11. Jeremy, Sr, Software Engineer, no degree says:

    The other way to drive down education fees and increase education value is to eliminate federal loan programs. This is obviously an unpopular suggestion, since FFELP and other federal loan programs allow students to attend university where they wouldn’t have been able to before. The problem with these programs is they allow universities to push indebtedness on their students with a perceived value of education and vague repayment expectations. There is also no risk to the university for driving up a student’s debt should the student be unable to repay, or if the student earns too little post college to repay in a reasonable time. You can’t bankrupt a FFELP loan, but you could bankrupt a private loan held by a university, hence the risk. Therefore, if the universities held the loans privately, guaranteed by non-government financial institutions, there would be a vested interest in driving down costs and increasing repayment potentiality by providing education that would result in the student’s ability to repay the loan.

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