Why Is College So Expensive? – Where The Money Goes

by | Nov 25, 2020

Why is college so expensive? The answer might surprise you.

Truth be told, there isn’t just one factor behind the rising costs of a college education. In this article we’ll take a closer look at college and the expenses surrounding it to find out exactly why college is so expensive and where that money actually goes.


What Is The Average Cost Of College?

If you’re getting ready to head off to college, you might wind up with some serious sticker shock when you realize all that it entails. Not even factoring in books, housing, living expenses, and other non-negotiable parts of college education, tuition can easily cost more than $10,000 – per semester. 

Attending a public university or community college will help reduce these costs, but unfortunately, that’s not an option for many students (or perhaps not the best option). There are plenty of ways to make college more affordable, but the reality is that many students simply aren’t aware of the ways they can cut down on their expenses. 

College tuition has more than doubled since the 1980s, and the problem isn’t going away. More than 45 million Americans have student loan debt, contributing to a national total of $1.5 trillion. In 1975, the average price of attending a public college was $8,000. Today, it’s well over $19,000.

College Cost

Why Is College So Expensive?

So why is college so expensive? 

There are lots of factors behind the price hikes. Below are a few of the most common. 

College is Expensive


You’re not imagining it if you’ve noticed that more students than ever are seeking college degrees. In fact, it’s estimated that by the end of this year, nearly 65% of all jobs will require a college degree. 

Because more colleges require a degree, more students than ever are headed to college to get one. Universities are in high demand and can, therefore, raise their costs to meet that demand. 

Funding Cuts

Whether you’re planning on attending a public university or a private one, funding cuts can result in serious increases in tuition. This is more common during economic downturns, such as the 2008 recession. In fact, following the 2008 recession, most universities dramatically increased their tuition costs as budgets had to be readjusted to meet other needs – unfortunately, this trend hasn’t exactly been reversed.

Private universities aren’t immune to this factor, either. Although they are less at the whim of the government when it comes to funding, they are still influenced by economic factors that can cause them to increase tuition seemingly overnight. 

Financial Aid Availability

The good news is that financial aid is more readily available than ever before. Although it sounds counterintuitive, this could lead to an increase in tuition costs, too. As of right now, the government will match student loans to the cost of attendance, so it goes without saying that many schools will naturally raise their prices to meet this increase. After all, they don’t have to worry about out-pricing potential students. 

Unfortunately, student loans are not the panacea the government and universities would like you to believe they are – you do have to pay them back, after all.

In 1970, financial aid programs were more or less nonexistent. In fact, the large majority of all students received no assistance from the federal government in order to attend college. That changed in 1978, when Congress passed the Middle Income Student Assistance Act. This made it possible for all undergraduates, regardless of income, to qualify for subsidized loans and for middle-income students to apply for Pell Grants.

When a university knows that students will get this financial aid money, it will raise fees and take advantage of that to capture the offset themselves. But, as we mentioned above, states are increasingly drawing back on how much funding they are providing to schools – making this financial aid factor a worrying trend as college prices continue to rise.


Another factor behind the rising costs of college? 


As more students enroll in colleges and universities, more for-profit colleges have entered the scene. In fact, between 1998 and 2008, enrollment in for-profit universities grew by 225%. With more universities offering degree programs, other schools have had to compete harder for potential students. 

As a result, more money is being spent on marketing and recruitment efforts. The current national recruitment spend for higher education is well over $10 billion a year – and it’s only increasing. 

Administrative Expenses

Many universities have far too many administrative expenses, leading to higher costs of tuition. For example, some schools have increased hiring rates of faculty, while others have increased their budget for buildings and grounds maintenance. Many of these expenses are probably unneeded, but unfortunately, those costs tend to fall on students when it comes time to pay their tuition and fees. 

Hiring more faculty is one common reason why colleges increase their tuition costs. As you might expect, it’s not something that students are willing to skimp on either. The better the instructor, the greater the likelihood of finding a job. It’s important for universities to spend time and money in acquiring and recruiting highly educated faculty and staff. 

There are actions that could reduce this expense, of course, such as holding larger classes, hiring more adjunct faculty, or even housing fewer books in the library. None of these options are particularly desirable or popular among students, though. 

High Executive Salaries

Many colleges have a top-heavy budget, with high-ranking administrators earning extremely high salaries. There’s been a massive increase in university president pay, with the top-paying schools offering more than $97,000 a year to their presidents. That’s an increase of more than $30,000 within the last six years alone. 

More Student Services

Finally, a factor behind high tuition costs that we can agree with! 

More colleges than ever are adding additional student services. While these services are absolutely necessary and a key factor in helping students be successful, they do, obviously, increase campus budgets. Services such as personal counseling, academic support, and healthcare are all on the rise. 

In fact, there has been a dramatic increase in the number of non-teaching personnel on many campuses, with several administrators making six-figure salaries. Schools are spending more money than ever on increasing their rankings and attracting better students, which they are doing by improving student facilities and student services. 

In addition to things like counseling and academic support, more schools are spending money on improving athletic facilities and extracurricular opportunities, too.

Is An Expensive College Education Really Worth It?

Sadly, the demand for a college degree works in two ways. It not only makes tuition more expensive, but it also makes the concept of earning a college degree significantly less advantageous over time. 

According to figures from the New York Fed, more than a third of college graduates are underemployed, with 13% in low-paying jobs. 

So is it worth it? You be the judge. For any students, earning an expensive college degree is a necessary step on the journey toward a lucrative, rewarding career. For others, it just creates new obstacles in the form of crushing student loan debt. 

Understanding the return on investment of your degree is important. Take the time to research career prospects in your field and make sure you have a good chance of finding a job after you graduate. 

Expensive College Education

What You Can Do About The Rising Costs Of College

Fortunately, there are a few ways you can reduce the cost of college. It can be intimidating to think about how much you’re going to have to pay, so consider all of the options out there and start planning early to combat these rising costs.

College Scholar

One of the first and most important steps you should take is to fill out the FAFSA, or the Free Application for Federal Student Aid. This document is a form that will help you determine your financial aid eligibility from the government. 

In most cases, financial aid will come in the form of student loans, Pell grants, and other government funding. However, almost all universities also use the FAFSA to determine eligibility for institutional awards, including scholarships and additional grants. 

You can always apply for outside scholarships, too. In fact, thousands of dollars of scholarship funds go unawarded each year – simply because nobody applies! Don’t leave money on the table and do your due diligence when it comes to looking for funding opportunities. Check with your school, any organizations you may be a part of, or even with your employee. There are always certain requirements you’ll have to meet, but it’s worth the small amount of effort for sure.

Of course, the smartest thing you can do when planning for college – as with anything in life – is to budget. The average cost of a degree is sure to only rise, so it’s a good idea to look at where you can cut costs now. Consider eating out less or canceling subscriptions you don’t use – simple steps will help you meet your financial goals and afford college tuition more easily. 

Additionally, when you do go to college, there are expenses there as well. So, make sure when you’re stocking up on what you need for class, such as a computer or textbooks you’re getting the best deals. When it comes to textbooks, try out some textbook websites to see if you can save some cash. You can also always rent books and you can even sell your own books back to some buyback sites to make some money.

You may not be able to stop a college from increasing its tuition and fees, but you can educate yourself on ways to make college more affordable. A little bit of research goes quite a long way!

Andrew Green

Andrew is a successful entrepreneur and lifelong learner. Throughout his career, he has watched hundreds of online courses that have allowed him to achieve success in highly competitive fields such as online marketing, investing, and sales. Andrew is committed to expanding his knowledge and expertise and he reviews the premium courses he watches on his online blog.
Posted in: College,Education

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