Home > Students > A Simple Chart That Explains Why College Tuition Is Going Up

Comments 2 Comments

Americans of all ages grapple with the cost of higher education, whether it’s trying to save for the future, choosing a college or repaying student loan debt. Tuition and fees at U.S. colleges has increased an average of 5% every year for the last decade, and the $1.2 trillion in outstanding student loan debt is projected to grow. In the next few weeks, Credit.com will explore several of the answers, opinions and theories out there about why these numbers keep going up.

A four-year education at a public college is on track to cost $94,800 by 2033, according to data from the College Board. Yep, you’re looking at nearly $100,000 for four years at an in-state public school, if tuition and fees increase by 5% annually, as they have for the past decade. Of course, if you don’t have kids yet (2033 is 18 years from now), it could cost even more.

Legislators and other U.S. leaders, including the President, have called for improved access to affordable education.  So how did we get to this 5% annual hike in tuition and fees? Why is college so expensive?

Here’s an answer for you:

Penn State budget

This is a graph made publicly available on the website for Penn State’s budget office. It shows where the money for the general funds portion of the overall budget — 40% of the 2014-15 budget is general funds — comes from. For this academic year, 79.4% of that budget comes from tuition and fees, and 13.2% comes from the state. About 40 years ago, state money made up more than half of this budget.

Penn State has the second-most expensive in-state tuition and fees in the country, and the priciest is 133 miles west at the University of Pittsburgh. There’s a reason for those high sticker prices: State appropriations for higher education in Pennsylvania declined 11.4% in the past five years. Only Arizona and Louisiana cut more from their state school systems (15.9% and 13.2% respectively), according to Grapevine, an annual report from Illinois State University on state support of higher education. Speaking of Arizona: The state just cut all funding for its community college system, Inside Higher Ed reports.

“As far as tuition goes — for public institutions, it is a well-documented fact that our state appropriations — which subsidize the tuition for in-state students — have been eroding for decades,” wrote Lisa Powers, director of the Penn State office of strategic communications, in an email to Credit.com. “Penn State is currently at the same funding level from the state that we were at in 1996, when we served about 20,000 fewer students than today.”

State funding isn’t the only thing determining how much students in Pennsylvania or any other state have to pay to get a degree — the “why is college so expensive?” question has many answers — but it highlights an industry-wide predicament: If one money source isn’t cutting it, whether it’s the government, fundraising campaigns or alumni donations, it has to come from somewhere. The state appropriations issue is much more significant in some states (like Arizona, Louisiana and Pennsylvania), but nationwide, state appropriations have increased about 9% over the last five years.

Consider the fact that tuition and fees outpaced inflation in their steady climb over the last several years, while wages have stayed the same or fallen, according to 2014 analysis from the Pew Research Center. Those statistics can make that upward-trending tuition-and-fees figure seem even more daunting and intensify the country’s ongoing concern about student loan debt. Government funding (or the lack thereof) isn’t the only thing affecting education prices, but it appears to be a significant part of the many things affecting students’ access to affordable education. (Credit scores can also play a role, specifically if you need private student loans to subsidize your child’s education costs. You can check two of your credit scores for free on Credit.com to see where you stand.)

More on Student Loans:

Main image: iStock; graph: Penn State University Budget Office

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • ErikKengaard

    So . . . all that the chart shows as a “cause” is a decline in state funding. What caused the decline in state funding? A decline in revenue, or a diversion of revenue to other expenses? What other expenses? Why?
    Come on, let’s get to the root of this matter.

    • berky

      This article is a bit ridiculous IMO. Most of the last paragraph is completely idiotic.
      The root of the matter is that for too long we have been told college is the only way to secure a good job and have a future, no matter the cost of such education. That lie has led to a boom in people entering the college system, combined with all of the unchecked loans (because obviously ANY degree will make you millions and everyone will be able to pay that loan back, no problem). The bubble will burst, and tuition costs will eventually come back to reality….. when that will happen, is anyone’s guess.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team