Rising Cost of Public College Education: Causes and Consequences

Introduction

The US government has reduced state funding for higher education institutions in an effort to lower college costs, especially for ethnic minority groups, since rising educational expenses have made it harder for students of color and students from lower-income households to enroll. There are numerous benefits to graduating from a top educational institution — most notably, access to higher-paying careers — yet the financial pressure on students from low-income families remains severe. With stagnant household earnings, racially and economically diverse students find it increasingly difficult to afford access to high-priced colleges and universities.

Recently, the cost of attending a public college has surged to approximately $21,370, compared to $8,250 in 1980 — a roughly 30 percent increase in real terms (Hess, "The Cost of College Increased"). The three primary causes of this rise are: government and institutional financial aid structures, sticker pricing and price discrimination, and cost increases driven by management inefficiencies. The consequences include falling student enrollment and graduation rates, as well as delays among young adults in buying homes and planning marriages due to loan repayment burdens. The most effective remedies are cutting or eliminating federal education funding and shifting toward part-time faculty hiring.

Facts Regarding the Problem

According to a 2019 report from the Center on Budget and Policy Priorities (CBPP), tuition has increased by 37 percent and net costs have risen by a further 24 percent (Hess, "The Cost of College Increased"). State funding levels remained well below pre-recession figures. Forty-one states — including Arizona, Hawaii, Georgia, Alabama, and Colorado — spent less than 13 percent of their budgets on students at educational institutions. Following the recession, the federal government increased funding to public institutions and students for improved educational access, with funding rising more than 60 percent over the past decade alone.

Tuition revenues now make up roughly half of public institutions' total revenues, with the remainder covered by government funding (Dickler, "Why College Tuition Keeps Rising"). This distribution has shifted considerably from earlier decades, when tuition fees accounted for only about a quarter of public college revenues. Living costs have also increased significantly. Students who prefer to live on or near campus face rising expenses for healthcare, meal plans, fitness centers, private clubs, and upgraded laboratory facilities — all of which place additional upward pressure on tuition. Students who enroll in an institution's health care plan may face particularly steep out-of-pocket costs.

When enrollment grows, additional expenses increase automatically — including campus construction to accommodate new students and administrative costs such as faculty salaries. When the government approves loans without thoroughly assessing students' and families' ability to repay, the resulting debt burden falls on both the government and the institutions when families default (Mitchell, Leachman, and Saenz 2). Administrative layers multiply, the bureaucratic apparatus grows more complex, and institutions respond by raising tuition to offset those costs.

Cuts in state funding to public institutions compound the problem further. Under the GI Bill of Rights (1944), the federal government sought to expand college enrollment by providing aid to families (Toppo, "For-Profit Tuition Rises"). Inflationary pressures in the 1970s then triggered a sharp rise in tuition fees, a pattern that has continued in various forms since.

Despite the cost increases driven by financial aid structures, price discrimination, and management issues, proponents of high tuition argue that advanced education carries substantial returns. The most commonly cited benefit is access to high-salary employment after graduating from a prestigious university (Honu). A well-compensated graduate, the argument goes, is well-positioned to repay student loans from post-graduation earnings.

Opposing Viewpoints

Another opposing viewpoint holds that institutions do not simply compel students and families to pay high tuition — ultimately, the choice belongs to students and their families. They weigh the prospect of a bright future and higher lifetime earnings against the upfront cost of tuition. Their decisions take into account factors such as a college's academic outcomes, post-graduation earnings data, and the diversity of the student population (Davidson, "Is College Tuition Really Too High?").

Furthermore, research suggests that federal financial aid is distributed unevenly, which itself drives tuition higher. Elite universities compete to attract high-achieving students by offering merit-based aid, meaning that a middle-income student with strong grades may actually receive less institutional support. Similarly, a high-achieving student from an affluent family may also receive a smaller share of institutional aid. As a result, government funding is allocated inequitably across the income spectrum.

One critical cause of rising public college costs is the structure of financial aid from both government and institutions. The government has expanded financial aid to public institutions so that students from lower-income families can enroll (Cude 18). However, when families later default on loans, the financial pressure transfers back to the government. Meanwhile, when institutions provide loans to deserving students, they often recoup those funds from other students through higher tuition. Federal lending has increased substantially over the past several years, and data show a sharp upward trend in costs that corresponds closely to this expansion in public lending.

A second major cause is price discrimination and sticker pricing. Price discrimination occurs when a college adjusts pricing according to a student's financial circumstances — for example, when an institution offers reduced fees to lower-income students, those paying full price effectively subsidize the difference. The sticker price represents the full cost a student pays, encompassing tuition, admission fees, and ancillary charges such as meal plans, gym access, and health care. Institutions raise the sticker price to maximize revenue from full-paying students, which in turn increases overall institutional revenues while deepening inequities for those who cannot afford to pay the full amount (Amour, "Report: Living Expenses").

Three Causes of Rising Public Education Costs

The third major cause is management inefficiencies within public institutions. As enrollment grows, institutions must hire additional faculty and construct new campus facilities. Managing a large and expanding workforce and physical plant creates administrative complexity, which can manifest as poor oversight, internal inefficiencies, and a lack of clear accountability — all of which contribute to higher operating costs that are passed on to students through increased tuition (Desrochers and Kirshstein 21).

One of the chief consequences of rising public college costs is a decline in student enrollment. A Harvard University study found that among American students who enrolled in a six-year university graduation program, 56 percent dropped out due to high tuition costs. Additionally, only 29 percent of students who entered two-year programs completed their degrees (Waldron, "Study: Nearly Half of America's College"). Many students no longer pursue four-year programs, instead switching to less expensive community colleges. Unable to meet tuition costs, they settle for lower-paying jobs rather than completing degrees.

A second major consequence is falling graduation rates. As more students drop out and new enrollments decrease (Hemelt and Marcotte 19; Hemelt and Marcotte 448), overall graduation rates decline. Students find it increasingly difficult to remain enrolled for four years. Many opt instead for short courses at two-year institutions to earn certificates that qualify them for employment sooner — a pattern particularly common among students from low-income families who need to begin earning as quickly as possible.

A third key consequence is the way student loan debt delays important life milestones for young adults. Forty percent of young adults have postponed buying a home because of outstanding loan obligations ("Surprising Side Effects of Rising College Costs"). Fourteen percent report delaying marriage because of debt, female graduates are having their first child at later ages due to loan repayment demands, and 27 percent of the same population have delayed medical or dental care for the same reason.

One solution to the problem is the elimination — or at least significant reduction — of federal educational funding and loans. This can be achieved by scaling back government intervention in loan provision to public institutions and shifting that responsibility to the institutions themselves. Institutions managing their own loan programs would be better positioned to assess students closely for default risk and to design flexible repayment arrangements for low-income borrowers, ultimately reducing the financial burden on the public sector.