Why Is College So Expensive? Explained.

They say you can’t put a price on a good education, yet many colleges are listing the price tag at upwards of $40,000 per year. While we all know college is expensive, it’s a bit of a mystery to most of us just why that is.

The high cost of tuition is actually the high cost of instruction and here’s why it’s going through the roof.

An Elite History

The average age of the top 100 colleges in the United States is 170. When most of these institutions were founded, college truly wasn’t for everyone. The elite with family money or those entering professions requiring advanced degrees (often the same group) attended college—roughly four percent of people. For everyone else, there were trade skills such as manufacturing and labor, that required on-the-job training versus a degree.

That’s the way it was for more than a century. Then a few things began to tip the scales:

• The post-WWII GI Bill offered free tuition to veterans and nearly 2 million seized the opportunity before 1950.
• Government subsidies allowed more public universities to be founded, making tuition within reach of more Americans.
• Manufacturing and labor jobs were replaced by technology.
• Corporate America rose and demanded talent educated to meet its specific needs.

Supply vs. Demand

Since that time, college has become less of a question (should I go?) and more of a requirement for employment. That demand has been artificially created. The more people who go to college, the more degree-holding employers there are, and the more they want to hire other degree holders like themselves. It’s a cycle that has led to nearly 70 percent of American students attending college straight out of high school today.

And yes, college can be an incredibly formative experience. Beyond preparing for careers in a particular field, it’s a time to learn the soft skills that make you a successful person. It’s also a time to gain independence and shape your views of the world.

But as the demand for college has skyrocketed year over year, the growth of universities hasn’t kept up the pace.

A good analogy is the cost of beer at a sporting event or concert. You can only buy beer in the stadium and everyone wants one, so it’s possible for the stadium to charge for a single Bud Light the same price you’d pay for a 12-pack at the gas station. We’ll still buy it. And as long as the universities hold the power, they’ll continue to charge stadium prices.

The Power of Prestige

Public colleges and universities are able to keep tuition lower than private institutions thanks to government subsidies. The more public institutions that pop up, the more competition there is for the enrollment offices at private schools. So they fall back on an old marketing tactic to keep numbers high: the power of prestige.

It’s a phenomenon. The more a college or university charges, the more people will apply. People assume that when instruction costs $70,000 per year, you must be getting the best of the best. And they want it, even though they can’t afford it.

As extra insurance for big applicant numbers, colleges with high tuition costs started coming up with creative ways to pay—grants, work/studies, and loans. The more access to those kinds of funds applicants have, the larger a price tag they are willing to settle on. It’s a bit of a brain trick—$70,000 doesn’t sound so bad when you only have to pay $15,000 of it now. And it sounds like a better deal than paying full price at a $15,000 per year school immediately.

What Now?

Marketing tactics like these aren’t new in any industry. But for those of us who believe a good education should be everyone’s right, it does feel a wrong that learning comes at such a high price. What we can do now is tackle the debt we have, and work on ways to address the problem for coming generations.