Why Is Higher Education So Expensive?

College tuition costs have gone up 945 percent since 1980. The increase in tuition places a heavy burden on young people and their families. What has made college tuition so expensive? Professor Daniel Lin  explains that tuition prices are rising so quickly because of supply and demand. As demand for college increases, universities can respond by increasing either enrollment or tuition costs. Since most universities are limited in the number of students they can enroll, they have largely responded to higher demand by increasing tuition.

Demand for a college education has increased partly because graduating college dramatically increases job prospects and partly because of government subsidies. Although many believe subsidies will make college more affordable, government subsidies actually contribute to rising costs. “When you subsidize something, it’s cheaper for people to consume. So people consume more of it and demand rises,” Professor Lin says. A rise in demand will mean a rise in costs.

Colleges have no trouble filling seats, even with rising costs, so they keep spending and increasing tuition. Improvements to campus facilities and the addition of more administrative staff make college tuition even more expensive without necessarily improving the quality of education students receive. We now know the root causes of rising tuition—promises of higher wages and increased subsidies. Professor Lin contends that this information should be used to seek solutions.

16 Comments

  1. calebbunch@gmail.com

    I know some several young people who have graduated from top colleges with more than $100,000 in debt and are working service jobs that they could have easily obtained without a college education. We are living in the largest education bubble in history. Too many companies require employees to have a degree even though their college education does not have anything to do with their responsibilities at the desired job. 

  2. rhinoman21

    Is it possible to create individual university programs that are Work Study-like? For instance, is it possible to hire students to work for universities doing some sort of work in return for reduced tuition rates? I could naively imagine "hiring" a group of students to, say, help in maintaining the campus gardens and other similar landscaping jobs. Is it possible, practically or hypothetically, to offer those students reduced tuition rates either in addition to or in place of payment for their services?

  3. Ravensburger3

    Since you are saying that since government is increasing demand for college through subsidies, and universities can not increase supply enough, should we focus more on the government specifically aiming to increase enrollment capacities. If we had the government specifically give grants towards increasing enrollment, would that help lower tuition while still keeping demand for youth to receive a higher education?

  4. Anonymous

    By the way, that would be a class issue, not a race issue Amy. I know people try to make it seems like whites can’t be poor, but they just pretend whole regions of poor whites (like Appalachia) don’t exist.

  5. taschrant

    I think accreditation of universities helps keep the supply of learning centers, like universities, to a minimum to help block out competition.  What are your thoughts?

  6. Anonymous

    Nick, I don’t think Amy at all is trying to make it seem like a particular race can’t be poor. She’s referencing what she has learned in a class, that there’s a worsening socioeconomic divide in the US that’s affiliated with race. That doesn’t mean individuals from any given race cannot be poor/rich, but that the poverty rates by race are empirically different. I believe Amy is also expressing incredulity that this is worsening.

    Of course you’re right, Nick, that there are many suffering and neglected poor of all races, and that everyone deserves help. I confess I don’t know how to do that.
  7. Anonymous

    I think you’ve got a good point. For example, graduates who cannot find work and choose to pursue retraining can only defer their costly federal loan payments if they pursue halftime (or greater) studies at a Title IV institution, even when the same coursework could be purchased far more cheaply through alternative scholastic means. Instead of taking, for instance, a prerequisite chemistry or math class online–including access to all pedagogic materials required at a relatively affordable price, these students are forced to pay significantly more to take the same classes at a state school where the tuition is far higher and the students are required to purchases exorbitant though largely redundant or ineffective textbooks. And they’re paying more because…they can’t afford to pay back their loans while pursuing retraining with a decreased work schedule/income. Catch-22. It’s time to break the competition block you brightly referred to.

  8. Anonymous

    HAHAHA, Seriously that is throwing other variables out of the equation. What about the GI Bill ,enough said!

  9. Anonymous

    This guy is ridiculous. The reason college tuition is rising is because the colleges are in a made rush to make money.  Plain and simple.  Subsidies don’t necessarily increase costs — ever heard of the GI bill? The issues massive privatization of the education system.  It is all about turning a profit instead of educating students.

  10. Anonymous

    the GI bill only took a major affect from 1946-1949. Many of those didn’t actually go to college but to trade schools.

  11. Anonymous

    It would raise tuition.  The more the government gives grants, the more people go to school (demand).  If the government pulled its nose out of the education business and stopped giving loans, grants, etc.  and if the government stopped regulating colleges, especially new colleges from starting up (supply), then prices would be competitive.  

  12. Anonymous

    Colleges aren’t made to be for profit?  If you buy that I’ll throw the golden gate in free.  The world’s greatest professors will not spend 8 years in school and a lifetime dedicated to research to teach for free.    

  13. Elizabeth

    In addition… college degrees are actually becoming less valuable. People are being lied. We let business (disguised as schools) go into high schools and indent 18 year olds, as soon as they aren’t children anymore.

    http://www.forbes.com/sites/georgeleef/2014/04/21/college-degrees-arent-becoming-more-valuable-their-glut-confines-people-without-them-to-a-shrinking-low-pay-sector-of-the-market/

    http://www.businessinsider.com/these-two-charts-prove-a-college-education-just-isnt-worth-the-money-anymore-2012-6

  14. Anonymous

    “supply and demand” is a ‘make-money’ (economic) concept, and hence the view of colleges being in a “[mad] rush to make money” is implied in the article.

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