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Written by Cecilia Morales:
Introduction
Given that a college education is viewed as an essential component of preparedness for the workforce, a vast number of Americans decide to pursue this path, with 17.9 million students enrolled in 2022. Due to the drastic increase in college costs over time, many individuals have had to turn to alternative ways to meet their financial responsibilities. While some people are able to graduate debt-free due to scholarships or savings accounts, others are burdened by their loans for decades. This past August, President Joe Biden proposed a plan to relieve the loan debt of millions of Americans, but this plan was quickly shut down when both the Senate and House passed a bill to block the program. As a result, the future of the President’s plan now lies in the hands of The Supreme Court, which will be decided at the end of the month. While we wait for that decision, we’ll take a look at some of the trends in college costs over the past few decades.
A 747.8% Increase
747.8 is the percent increase (adjusted for inflation) in college tuition in the past 60 years. During the 1980s, this inflation hit its peak as tuition prices rose by 121.4% within 10 years. Public universities held an otherwise steady pattern, with tuition rising by 75% each decade from 1970 to 2000. Recent trends presented by the National Center for Educational Statistics revealed that average in-state tuition and fees at public universities increased by 10% from 2010 to 2020, totaling $9,400. Private non-profit universities showed a more extreme cost growth, with tuition and fees averaging $37,600, a 19% increase over the same period.
As explained by the American Enterprise Institute, the exponential growth of college tuition has outshone the inflation of housing, medical care, and many other living expenses. These rising numbers have led 77% of Americans to believe that a college education is difficult for them to afford, according to a poll by Morning Consult in 2022.
Where does the money go?
In a recent Forbes article, an analysis of these rising university costs was conducted, resulting in a few possible explanations. Firstly, it was suggested that colleges may be dedicating more funds towards support and resources for their students, with advising services costing institutions thousands of dollars per student. Secondly, findings demonstrated that the fluctuation of local and state funding directly impacted financial expectations from students, particularly during economic downturns. The third explanation was that the cost of higher education could simply be because of increased costs regarding the service of education. While other industries have innovated to increase productivity, the pace of teaching has remained stagnant to maintain quality, leading to higher costs to universities and students.
The National Center for Education Statistics found that universities had $671 billion in expenses from 2019-2020, with public institutions spending $430 billion and private nonprofits spending $228 billion. The NCES broke down the distribution of these costs, demonstrating that both public and private nonprofit universities dedicated the biggest percentage of their expenses to “Instruction”, which relates to funds provided to departments and other divisions, sometimes including research and public service. The second most budgeted-for category for both types of institutions was “Academic Support”, which consists of student services such as admissions, health services, and extracurricular activities meant to benefit all students. This category of expenditure was particularly crucial in the 2019-2020 school year due to the additional support that was needed by students to adjust to the impacts of the Covid-19 pandemic.
Aid
The US Department of Education awards around $46 billion in scholarship money each year. Although there are 1.7 million scholarships made available to college students, only a mere 7% actually receive these financial awards. Alarmingly, data from 2015 revealed that nearly half of all high school students (47%) did not fill out their FAFSA, which led to $2.9 billion in unclaimed federal grant money.
First-time undergraduate students at 4-year universities receiving government grants are awarded an average of $14,890 yearly. Students attending private universities receive an additional average of $8,005 in scholarship money compared to their public school counterparts. Regardless, the National College Attainment Network calculated that for the average Pell Grant recipient in 2019-2020, only 24% of public colleges were categorized as affordable.
Loans
An alternate route for tuition assistance is taking out student loans. Many Americans turn to this option, with 43.8 million borrowers as of April 2023, leaving student loan debt as the second-highest debt category following mortgages. Typically, students attending a public university borrow $31,410 to complete their undergraduate studies, leading to a US student loan debt total of $1.757 trillion.
According to the Education Data Initiative, only 22% of adults have reported paying off their student loan debt, with another 20% of adults stating that they still have significant undergraduate debt. It was found that the average student borrower takes 20 years to repay their loans, with some professional graduates taking up to 45 years to repay theirs. Luckily, recent findings indicate that the rate of debt accumulation has decreased, with analysis showing that most consumers are adequately managing their student loans.
The Forgiveness Controversy
With the cost of higher education increasing significantly over the past decades, some political leaders have advocated for measures to address educational debt. This has resulted in many promises and proposals meant to reduce the burden debt places on middle and low-income families in the United States. President Biden, for instance, has been pushing for his 3-part plan to be executed. This plan consists of: (1) extending the student loan repayment pause; (2) relieving some debt of low and middle-income families; and (3) adjusting the repayment plan to make student loans more manageable. Other Americans are concerned about the economic consequences of Biden’s ideas, which have caused both the Senate and House to reject his program. It’s expected that The Supreme Court will rule whether Biden’s plan can proceed by the end of June, leaving millions of Americans on their toes as they await to see if their debt will be forgiven.