Running Head: WHY IS COLLEGE SO EXPENSIVE?

Why is College So Expensive?

Jessica Turpin

Post University
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Why is college so expensive?

There are few decisions more important than the choice of whether or not to go to college

and if so which one to go to. There are many things that a student considers when choosing a

college or university after they have made the decision to pursue their education. All factors

must be considered before a choice is made and the student obligates the next four or more years

accruing one of the most significant debts that will be encountered in a lifetime. One of the

factors is cost. The cost of tuition will vary from one college or university to another but what

remains the same is the fact that it is expensive everywhere. The purpose of this literature

review is to analyze the reasons for and inform the reader of the high and growing cost of post-

secondary education.

John Thelin (2015) aims to answer the question of why tuition is so high by taking in to

account why it was so inexpensive a hundred years ago and what happened in those years to

drive tuition up so drastically. Thelin explains the cost of tuition at an upscale university in 1910

would be somewhere between $120-$150. This is the equivalent to about $3000 currently. This

demonstrates that tuition has not risen at the same rate of inflation as current cost of tuition is

actually around $50,000 at a university of similar qualities. Low cost combined with low tuition

meant little need for and availability of financial aid. As noted by the Best and Keppo article

discussed below, the presence of aid and credit may be a contributing factor to the rise of the cost

of tuition. Thelin discusses the absence of financial planning in universities due to the reliance

on funding from philanthropic sources. Because funding always came there was no focus on

planning as it was assumed the money would keep coming. Because tuition was either very low

or non-existent schools were limited in the studies offered. Philanthropic gifts were used to
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construct buildings but did little to nothing in the way of paying for instruction or what would be

called student affairs today. Essentially, Thelin believes the inexpensive tuition was due to lost

costs and absence of diverse programs of study and student affairs. As work began to improve

these conditions, tuition began to rise.

Karen Hua (2015) approaches the subject of tuition pricing from the individuals point of

view. She conducts her own research on why students think tuition costs are so high. Among

some of the answers some of the same reasons given by the research projects done by the authors

below. Reasons include the cost of construction and expansion as well as overpaying members

of college and university administrations inflated salaries and benefits. The fewest responses

were regarding tuition revenue being spent on academics such as quality instructors and

educational resources. Students were mostly in agreement that high tuition is a necessary evil

that they are begrudgingly willing to bare.

Best and Keppo (2014) inform that 58% of American college students rely on loans to

afford higher education leaving college graduates with an average debt of $23,000. Both federal

and state government is attempting to make Higher education a more attainable goal for

Americans through the expansion of various financial aid programs but tuition costs are still on

the rise. Best and Keppo (2014) suggest one reason for this is the growing availability of student

aid in the form of easily acquired loans affecting the laws of supply and demand in higher

education market leading to the rising price of tuition. The authors conducted a study to test this

theory by defining the driving candidates of supply and demand and adjusting cost to account for

inflation and collecting data. The data they collected shows a positive correlation between credit

(loans) and price to supply and demand. The study concluded that the expanding lending market

in response to the growing demand for higher education may be causing tuition prices to grow
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disproportionate to the aid and credit available. In other words, while the purpose of financial

aid and credits is to make higher education available to a more expansive group of American

students it may also be a contributor to the rising cost.

Thomas Sowell (1992) infers the college tuition costs are monopolistic. He notes the

price of higher education has increased steadily and that officials are attributing the tuition

increase to the rising cost to provide education. Sowell posits the rising cost of tuition is the

driving force behind the increase in cost. Cost is defined in this study as anything the college

spends money on or anything that has a cost. The increased tuition is being spent on more of

what colleges are already spending money such as research, staff, faculty and resources.

Because the college is acquiring more of these, the cost is going up. Colleges will only spend

more when they accrue more revenue, often through the tuition increase. Additionally, Sowell

attributes high tuition price to what he refers to as organized collusion among top schools in the

U.S. This collusion supports the concept of monopolistic business practices in higher education.

Furthermore, Sowell informs that college costs are based on individual circumstance. A student

with more money will pay more money and a student who is not as well off financially will be

offered more aid, grants, or discounts so the college is still able to collect money from both

students without reducing the cost of tuition.

Robert Martin (2002) addresses the cost of higher education saying that there is concern

that the federal and state government might step in to control cost in light of growing public

concern and absence of action from universities. In his article he argues that rising cost of tuition

is not just due to cost increase as mentioned by Sowell as a misleading cause. Martin attributes

part of the rise in tuition to decreases in third party support. He notes that unlike other

businesses, higher education relies on support from funders in addition to revenue generated
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through the provision of services. Both Martin and Sowell compare tuition prices to that of a

sticker price that one would find when purchasing a car in that they are negotiable and vary

based on the purchaser and individual circumstance. However, when there is less aid available to

students they will be responsible for a larger portion of the sticker price. Martins research

agrees with Sowells that the cost for tuition in private colleges and universities. Martin also

explores the idea of the purchase of information technology as a reason for tuition increase. He

suggests that before the productivity benefits of such technology can be of use colleges and

universities need to get past a cultural barrier that hinders their usefulness. Martin determines

the most significant factor in the increase in per student cost is the addition of non-instructional

staff and that the average student debt has doubled in the past 8 years. This is in agreement with

Sowells study that indicates tuition is going up because universities are spending more on

acquiring more resources, such as non-instructional staff.

Ronald Ehrenberg (2009) has also written on the subject inferring that over the past

decade tuition has increased at a rate faster than that of inflation. While Ehrenbergs writing

primarily focuses on Ivy League schools he discusses some of the same subject as others as

contributors to the increase in the price of tuition over the past decade. He identifies both

internal and external factors. Internal factors he identifies include endowment policies, tenure,

enrollment, housing, and heating. External factors include an increasing demand for selectivity.

This demand leads to increase expenditure to remain the most competitive. This increased

spending is offset by the tuition hike. Students are willing to pay this higher tuition because of

the desire to be viewed as the best, very much the same way that an individual would pay for a

brand name clothing article or pair of shoes. Unlike a pair of shoes an education is meant to

last a lifetime.
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While the various studies have each identified different reasons for the rise in tuition

price there is a general theme that can be seen. Inflation is not believed to be the cause of the

increase and each student pays an individually tailored price based on how much money the

university will be able to receive from them. Some of the common themes mentioned as reason

for the rise are increased spending and efforts to remain competitive in the higher education

market. While the focus of this literature review was not to find a solution to the problem so

much as identify why the problem exists, Best and Keppo (2014) offer some hope that the

problem will not persist forever indicating that if nothing is done to remedy this growing issue

the government may step in to regulate costs. The next question to answer is whether or not this

will be the answer to making college more accessible to students and keeping the amount of

student debt the individual graduates with at a reasonable amount or will it have negative

unforeseen consequences.