Why the Cost of Tution is Rising at us Schools

The average cost of tuition at a four-year public university is rising at a rate of 15 percent per year according to the U.S. Department of Education. In terms of inflation, the annual rate increase is 7.5 percent per year or 15 percent as measured from 2008-2010, which according to the U.S. Census Bureau, outpaces household income growth. That kind of cost increase is more than double the Department of Labor’s  3.1 percent inflation rate for 2011, and the Social Security Administration’s 3.6 percent cost of living adjustment for 2012.

A part of the reason tuition rates are going up is because state funding has been cut according to a report by Christine Armario of USA Today. Moreover, as subsidies decline and tuition rates rise, student and parent debt also increases. Despite this, the Institute of Education Sciences forecasts enrollment in post-secondary institutions will continue to rise from 18.1 million  to 20.6 million people between 2010 and 2020. Also per the IOES, total annual costs at four-year post-secondary educational institutions average above $21,000, or more than $84,000 per degree.

The burden of increasing tuition is not great, but is not as bad as it seems per Jordan Weissmann of The Atlantic. Specifically, Weissmann states tuition rates are a bad measure of cost inflation because they do not include net costs i.e. costs after distribution of grants. Furthermore, the increases in tuition, and the cost of tuition itself vary greatly across and within states. For example, according to the Department of Education’s College Affordability and Transparency Center, tuition at California State University at Long Beach is $4,810 per year, whereas at the University of California-Santa Cruz, it is $11,505.

Even if average tuition increases are being skewed up by a few statistical outlier states such as California and Florida, there remains a very real problem of millions of graduates not finding jobs. The U.S. Treasury Secretary recently announced that a two percent annual GDP growth is not enough to tackle high unemployment per CNBC. This makes any increase in tuition an amortizable expense after graduation, and that is not an educational incentive for the financial minded and forward looking student.

From an economic perspective, the forecast for the benefits of education is also stifled by educational administrative decisions. Furthermore, in an effort to stem the rising costs of tuition some schools are even cutting back on educational program expenses. The net effect of these kind of spending cuts is to lower the quality of education. For instance, the New York Times reports the University of California is considering cutting back educational programs and summer classes to compensate for lost state funding. This indicates a shrinking of educational options if not a decline in the quality of education.