NCPA - National Center for Policy Analysis

Why Is College So Expensive?

September 30, 2010

Soft consumer demand in a weak economy has led many businesses to cut prices, but this is not the case in the market for higher education.  In fact, tuition at American universities has been increasing faster than inflation for the past 30 years, say Courtney O'Sullivan, an editor at the National Center for Policy Analysis, and Angelica Gonzalez, a research assistant at the National Center for Policy Analysis. 

  • An increasing proportion of the cost of college education is paid for with federal aid, much of it in the form of student loans.
  • Between 1999 and 2009, the portion of average tuition and fees at a four-year public university financed by federal loans rose from less than 60 percent to about 75 percent.

So where is all this taxpayer money going?  Not the classroom. 

  • The Delta Cost Project on Postsecondary Education Costs, Productivity and Accountability reports that institutional spending per fulltime equivalent student for student services rose more than 36 percent at private research universities from 1998 to 2008, after adjusting for inflation.
  • By contrast, institutional spending on instruction increased only 22.4 percent at private research universities.
  • At public research universities, student services spending increased 20.1 percent and instructional spending rose just 10.1 percent over the same period.

Higher costs are not translating into better results for students bearing the debt, say O'Sullivan and Gonzalez.

  • From 2002 to 2006, the number of total degrees awarded per 100 fulltime equivalent students enrolled increased by just one at private research universities and by two at public research universities, according to the Delta Cost Project.
  • In addition, the share of students completing a bachelor's degree in four years or less fell from about 45 percent in 1977 to 31 percent in the 1990s, according to a National Bureau for Economic Research report.

Source: Courtney O'Sullivan and Angelica Gonzalez, "Why Is College So Expensive?" National Center for Policy Analysis, September 30, 2010.

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