Benjamin Franklin, one of the Founding Fathers of the United States. said that “An investment in knowledge pays the best interest.” Indeed, most people consider education as an investment. However, with the rising costs of college that leave students deep in debt, many are left to wonder if it is a worthwhile investment to pursue.
Just how much has college tuition increased in the last 10 years? In this article, incoming college students can use this historical perspective to come up with a financial plan to make college education a cost-effective venture. It will also educate them about the effects of rising college tuition so they can anticipate making major life decisions in relation to the cost of their education.
Most students see college education as the “golden ticket” to the American dream. The prevailing line of thinking is that getting a degree—any degree—will lead a college graduate to financial prosperity. In the past, students had little to rely on than anecdotes when deciding which college to attend. This is because prior to 2015, colleges did not report on median earnings by major, which could have made it possible for students to do a cost-benefit analysis of getting higher education (Akers, 2020).
Seeing college costs from an objective standpoint will help students brace for or even avoid the detrimental effects of rising college tuition. Foremost of these is taking on a staggering amount of student loans. According to data from the Federal Reserve, student loan debt stood at $1.64 trillion, exceeding the value of outstanding car loans and credit card debt (Duffin, 2020).
With ballooning student loans, graduates tend to delay making major life decisions, such as buying a home, getting married, or having children. Other effects of rising college tuition include students enrolling at less expensive community colleges or dropping out of college altogether. Undergraduates will also consider starting a business while graduates might be forced to work outside their college major (Online College, n.d.).
The cost of a college education has been steadily rising. As such, if you look at a college tuition increase graph, it resembles a steep slope. In 1963 for instance, tuition at a four-year public college cost $1,286 per year, which amounts to $10,555 when adjusted for inflation. This means that college costs grew by 140.6% when inflation was considered. From 1989 to 2016. The costs of college grew eight times faster than wages (Bustamante, 2019).
For full-time undergraduate students in the school year 2019-2020, tuition hikes across all sectors were consistent. Published tuition and fees for public two-year in-district, public four-year in-state, and private nonprofit four-year colleges increased by at least 20% in the past 10 years, according to college tuition inflation data from the Manhattan Institute. The costs only get steeper compared to 20 years ago. Published tuition and fees for public two-year in-district colleges grew by 47% when adjusted for inflation. Meanwhile, those for public four-year in-state rose by 102% while private nonprofit four-year colleges grew by 54% (Akers, 2020).
However, it is worth mentioning that average tuition fees for school years 2019-20 and 2021-21 had the lowest increase in 30 years. During this period, average published charges for tuition and fees for public four-year in-state colleges increased by only 1.1% while private nonprofit colleges had a minimal increase of 2.1%. This data suggests that the COVID-19 pandemic has halted rising college costs, though experts say that this effect may only be temporary (Hess, 2020).
Source: Institute for College Access & Success
Based on the College Board’s Trends in College Pricing and Student Aid 2020 report, public-two-year in-district colleges had the lowest average annual costs out of all institution types.
For academic year 2020-2021, public two-year in-district colleges charged $12,850. For the same period, public four-year in-state colleges cost $22,180; public four-year out-of-state colleges cost $38,640 while private nonprofit four-year colleges were the most expensive at $50,770 (Duffin, 2020).
Public two-year colleges posted the lowest 10-year change in tuition fees. For academic year 2020-2021, tuition and fees for public two-year colleges were $3,770, which is $510 higher than 10 years ago. Public four-year colleges registered the second-highest dollar change, with tuition and fees at $10,560, which is more expensive by $1,490 compared to 10 years ago. The steepest increases can be found at private nonprofit four-year colleges, which pegged tuition and fees at $37,650 which increased by $5,830 compared to 10 years ago (College Board, 2020).
Source: College Board
Public colleges are designed to make higher education affordable. However, the soaring costs of college tuition pose challenges to achieving this goal. According to data from ProPublica, the average cost of in-state tuition and fees for public colleges in the U.S. increased by 80% from 2000 to 2014 (Fei, 2016).
From 2001 to 2015, the public four-year college that had the highest increase was the Northern Mexico College, which registered an increase of 358.7%. This was followed by the University of Arizona, which increased tuition by 228.9% and the Arizona State University-Tempe, which hiked tuition by 215.1% (Fei, 2016).
However, there were also public four-year colleges that registered only single-digit tuition increases and even double-digit decreases for the same period. The Louisiana State University Health Sciences Center-New Orleans and Georgia Highlands College for instance, registered an increase of -31% and -3.6%, respectively. They are followed by Palm Beach State College, which had an increase of 2.1% and College of Central Florida with a 2.6% increase (Fei, 2016).
College costs not only include tuition but also room and board expenses. Data from College Board shows that average tuition, plus room and board costs have increased from 1990-91 to 2010-11. However, there has been a decline in these costs from 2010-11 to 2020-21 (College Board, 2020).
From 1990-91 to 2000-01, average tuition and fees, plus room and board for private non-profit four-year colleges in the U.S. went from $26,780 to $33,50 or an increase of 25%. In the next decade, it again increased by 30%. But for 2010-11 to 2020-21, these costs went down by 17%. Current figures put these costs at $50,770 (College Board, 2020).
Average tuition and fees, plus room and board followed a similar upward and downward trend. These costs increased by 26% from 1990-91 to 2000-01 and further increased by 52% in the decade that followed. However, for 2010-11 to 2020-21, these costs decreased by 15% when adjusted for inflation. For 2020-21, tuition and fees and room and board costs are pegged at $22,180 (College Board, 2020).
Source: College Board
For 2020-21, the average in-district tuition and fees at public two-year institutions in the U.S. was at $3,770. The top three states with the highest tuition and fees were Vermont at $8,600, New Hampshire at $7,100, and South Dakota at $7,090. Meanwhile, the states with the lowest average tuition and fees were California ($1,430) and New Mexico ($1,940).
When data from the last five years was considered, the state with the highest percentage change in tuition and fees were Louisiana (43%), followed by Nevada (23%), and Mississippi (22%). The states with the lowest percentage change in tuition and fees were Arizona (-15%), Florida and New Mexico (8%), and Wisconsin (7%).
When it comes to in-state tuition and fees for public four-year colleges, the average rate in the U.S. is $10,560. Similar to the results for public two-year colleges, the top two states with the highest in-state tuition and fees for public four-year colleges were Vermont ($17,510) and New Hampshire ($16,960). On the other hand, the states with the lowest tuition and fees for 2020-21 were Wyoming ($5,790) and Florida ($6,370).
Taking into account tuition and fees for the last five years, the states with the highest percentage increase were Alaska (18%) and Connecticut (17%). In contrast, the states with the lowest five-year percentage change were Florida (-8%) and Washington (-5%).
Source: College Board
Based on data from the Organisation for Economic Co-operation and Development (OECD), the U.S. has the highest tuition fees in the world. Among 35 OECD member countries, the U.S. had the steepest average annual tuition fees for full-time national students in both public and private colleges. Average annual tuition fees in the U.S. at public institutions at the bachelor level were at $8,202 in 2017. The U.S. is followed by Chile at $7,654 and Japan at $5,229 (OECD, 2017). For private institutions, U.S. rates were at $21,189 followed by the U.K. ($11,951) and Australia ($8,827).
In contrast, the OECD country with the lowest tuition fees was Portugal at an average of $1,124. Portugal is followed by Italy with an average of $1,658 and Spain with $1,830 (OECD, 2017).
The OECD report further showed that about a third of OECD member countries offer free college education for public institutions. Such countries include Denmark, Estonia, Finland, Norway, Poland, Slovak Republic, Slovenia, Sweden, and Turkey (OECD, 2017). In 10 countries, such as Australia and Italy, tuition fees do not exceed $4,000 (Warren, 2018).
Over the years, the cost of a college education in the U.S. has been steadily increasing. In the past 30 years, average tuition and fees were lowest at public two-year colleges, moderate at public four-year institutions, and highest at nonprofit four-year colleges. When costs for room and board are factored in, rates at public four-year institutions had lower price increases in the past 10 years compared to private nonprofit four-year colleges. However, tuition inflation has not spared public colleges, with some registering triple-digit percentage increases in tuition and fees.
Location also plays a factor, as various states have different average published tuition fees. Based on 2020-21 data, tuition and fees are most expensive in Vermont and New Hampshire for both public two-year and public four-year colleges. In the past five years, tuition fees increased the highest in Wyoming for public two-year colleges and in Alaska for public four-year colleges.
With this, the U.S. is the number one country among 35 OECD countries with the highest tuition fees. As a result, U.S. students and graduates feel the adverse effects of rising college tuition, such as steep student loans, delays in major life decisions, and dropping out of college.