Output Education

Education Blog

College Tuition

College Tuition

4 February, 2016

The term college tuition refers to fees that students have to pay to colleges in the United States and in some countries. Pay hikes in the U.S. have caused prolonged controversy since shortly after World War II. Except for its military academies, the U.S. federal government does not directly support higher education. Instead it has offered programs of loans and grants, dating back to the Morrill Act during the U.S. Civil War and the “G.I. Bill” programs implemented after World War II. Developed countries whose national governments directly support higher education incline toward more moderate patterns of change in college tuitions and different forms of controversy.


  1. Bubble Theory
    The view that higher education is a bubble is highly debatable. Most economists do not think the returns to college education are falling. In a financial bubble, assets like houses are sometimes purchased with a view to reselling at a higher price, and this can produce rapidly escalating prices as people venture on future prices. An end to the spiral can provoke abrupt selling of the assets, resulting in an abrupt collapse in price — the bursting of the bubble. Because the asset obtained through college attendance — a higher education — cannot be sold (only rented through wages), there is no similar mechanism that would cause an abrupt collapse in the value of existing degrees. For this reason, many people find this analogy misleading. However, one rebuttal to the claims that a bubble analogy is misleading is the observation that the ‘bursting’ of the bubble are the adverse effects on students who incur student debt, for example, as the American Association of State Colleges and Universities reports that “Students are deeper in debt today than ever before…The trend of heavy debt burdens threatens to limit access to higher education, particularly for low-income and first-generation students, who tend to carry the heaviest debt burden. Federal student aid policy has steadily put resources into student loan programs rather than need-based grants (see graph), a trend that straps future generations with high debt burdens. Even students who receive federal grant aid are finding it more difficult to pay for college.”
  2. Cost shifting and Privatization
    One proposed cause of increased tuition is the reduction of state and federal allocations to colleges thus making them shift the cost over to students in the form of higher tuition. This has mostly applied to public universities which in 2011 for the first time have taken in more in tuition than in state funding and had the greatest increases in tuition. Implied from this shift away from public funding to tuition is privatization, although the New York Times reports such claims are exaggerated.
  3. Student Loan
    Another suggested cause of increased tuition is U.S. Congress’ occasional raising of the ‘loan limits’ of student loans, in which the increased availability of students to take out deeper loans sends a message to colleges and universities that students can ‘afford more,’ and then, in response, institutions of higher education raise tuition to match, leaving the student back where he began, but deeper in debt. Therefore, if the students can afford a much higher amount than the free market would otherwise support for students without the ability to take out a loan, then the tuition is ‘bid up’ to the new, higher, level that the student can now afford with loan subsidies. One rebuttal to that theory is the fact that even in years when loan limits have not risen, tuition has still continued to hike. However, that may not disprove this proposed cause: It may simply mean that other factors besides ‘loan limit’ increases played a part in the increases in tuition.
  4. Lack of consumer protection
    A third, novel, theory argue that the recent change in federal law removing all standard consumer protections (truth in lending, bankruptcy proceedings, statutes of limits, the right to refinance, adherence to usury laws, and Fair Debt & Collection practices, etc.) removes students of the ability to declare bankruptcy. This is especially true because the government, if it is the lender or guarantor of the loan, has the ability to collect the borrower’s wages, tax return, and Social Security Disability income without a court order. Some have called the Federal Government ‘predatory’ for making loans which will have such a high default rate, since the default rate for Student Loans is projected to reach 46.3% of all federal loans disbursed to students at for-profit colleges in 2008.
  5. Additional factors

Other factors that have been involved in increased tuition include the following:
        The practice of ‘tuition discounting,’ in which a college awards financial aid from its own funds. This assistance to low-income students by the college or university means that ‘paying’ students have to ‘make up’ for the difference: Increased tuition. This factor becomes more noticeable in modern times, since more students nowadays are going to college, which means that there are less State and Federal grant funds available per student.

According to Mark Kantrowitz, a recognised expert in this area, “The most significant contributor to tuition increases at public and private colleges is the cost of instruction. It accounts for a quarter of the tuition increase at public colleges and a third of the increase at private colleges.”

Kantriwitz’ study also found that “Complying with the increasing number of regulations – in particular, with the reporting requirements – adds to college costs,” thus contributing to a rise in tuition to pay for these additional costs.