College tuition in the United States

In the United States, college tuition is the fee paid by students in exchange for the opportunity to attend classes at institutions of higher education and to earn college credits toward a degree. Most colleges and universities charge a fee for each unit or credit hour of a class, and each class is worth a certain number of these units, depending on how often the class meets and how demanding its content is. For example, a chemistry class that meets four times per week and has a laboratory activity might be worth five academic credits or unit hours. If the university offering this class charges two hundred dollars per unit, then taking this chemistry class would require the payment of one thousand dollars in tuition.

For colleges and universities that are privately owned, tuition from students is a primary source of revenue, while public institutions have at least some portion of their expenses paid for by public money generated through taxes. Traditionally, public colleges have therefore been less expensive for students than most private colleges. However, overall, tuition has risen considerably for all types of colleges in the late twentieth and early twenty-first centuries, leading to much controversy and debate over the costs of higher education. The average cost of college tuition and fees during the 2022–23 academic year for four-year private institutions was $40,700 per year, while the average cost for four-year public institutions was $9,800 per year, according to the National Center for Education Statistics.

Brief History

College tuition in the United States is handled somewhat differently than in many other parts of the world. First, the cost of higher education at US colleges and universities tends to be much higher than at similar institutions around the globe. Second, higher education in the United States is not publicly funded in the way that it is in many other countries. Outside the United States, it is common for the government to pay for part or all of a person’s higher education—this is seen as an investment in an individual that will benefit the overall society by producing a more skilled workforce. In the United States, there is no comprehensive tradition of the government paying for individuals’ education in this way. Instead, the US government has typically focused on providing students with financial aid in the form of loans or grants, and providing funding to public institutions to keep tuition relatively low. However, government support of higher education varies with each presidential administration and Congress.

Prior to World War II, colleges were primarily attended by students from wealthy families who could afford it. When the war ended, Congress passed the Servicemen’s Readjustment Act of 1944, or the GI Bill, which offered affordable college education to veterans. Nearly eight million veterans took advantage of the GI Bill, though it is important to note that many Black veterans and other veterans of color were not able to take advantage of the benefits of the GI Bill. States invested in building more colleges and universities to accommodate the influx of students from the GI Bill and the booming postwar economy. The 1965 Higher Education Act improved financial assistance to students from the government, making college more available to women, people of color, and others through a broad array of grants and scholarships.

However, the economic decline of the 1970s saw a decrease in the amount and size of grants and scholarships. The student loan started to become the more common form of financial aid, requiring students to take on debt. College enrollment, meanwhile, grew exponentially, resulting in higher operating costs for colleges. In most cases, tuition rose accordingly, a trend that continued into the twenty-first century.

In the United States, college students pay college tuition using personal finances, by taking out student loans from private lenders, or through the federal student loan program, through which the federal government facilitates low-interest loans for college students. Unlike many other forms of debt, these student loans are notoriously difficult to discharge through bankruptcy proceedings. This has led many to observe that the only options available to those with student debt are to either pay it off or to die. Since the early 2000s, student loan debt has been a subject of growing concern, as many individuals complete their college studies with hundreds of thousands of dollars in debt. Combined with the ever-growing competitiveness of higher education and the economic impacts of such events as the 2008 global financial crisis and the COVID-19 pandemic, this debt burden has raised questions about whether a college education is always the best option for young people to pursue.

Overview

There has been a slow decline in the amount of financial support provided to public colleges and universities by the states in which they operate since the 1990s. This gradual privatization came to a head in 2011, which was the first year on record in which public colleges and universities received more of their funding from tuition paid by students than from finances contributed by the state. Many saw this as cause for concern, and some observers hypothesized that higher education is experiencing a "bubble" not unlike that which affected the housing market in 2008. Under the bubble theory, the resource of higher education is currently overvalued (and thus, overpriced) in the marketplace, meaning that students are being charged more for their education than that education is worth in the long run.

In this scenario, the tuition paid by students—and the interest and finance charges associated with the student loans often needed to pay that tuition—outweighs the economic benefits the students can expect to attain as a consequence of possessing their degrees. While in the past there was a large, positive difference between the lifetime cost of a degree and the lifetime benefits produced by that degree, the margin has narrowed considerably due to increases in college tuition. This is why some economists have asserted that it no longer makes sense for all young people to assume that they need to have a college degree.

One explanation offered for the historical rise in the cost of higher education in the United States has been inefficiency in the ways colleges and universities carry out their operations. Those who hold this view point to the fact that, for many years, annual increases in tuition rates have far outpaced the annual rise in inflation, suggesting that colleges and universities are either deliberately charging more than they need to, or that they are operating less efficiently than they ought to and therefore require more funding. On the other hand, defenders of higher education argue that during this same period the amount of state funding directed to higher education declined considerably. They suggest that the size of tuition increases is directly attributable to the drop in state support. Because public support for taxes, bond measures, and other forms of state fundraising is extremely low, states are left with smaller amounts of revenue to fund public colleges and universities. These institutions, unable to quickly adjust their operations to conform to lower funding levels, have had to try to maintain their budgets by replacing state funding with tuition increases.

By the mid-2010s, there were calls from some politicians, education advocates, and others for a return to the higher levels of state funding of higher education that were common in the past. Proponents of this position point to the fact that several countries around the world successfully provide free or almost free higher education to their citizens. The subject is not without controversy, however, because even in countries where higher education is free, there is still a cost associated with it—the money to pay for college buildings and campuses, salaries for professors, staff, and administrators, and similar expenses must come from somewhere. In countries that provide free higher education, tax revenue is used to support public colleges and universities, and tax rates in these countries tend to be significantly higher than the rates that citizens of the United States are accustomed to. Those who oppose the implementation of free higher education in the United States point out that making this benefit available would mean an increase in taxes.

Regardless of the source from which college tuition is being paid, questions have also been raised about how college tuition is being spent. One source of concern for larger, more prominent institutions is the amount spent on college athletics, including sometimes sizable salaries for coaches. Colleges and universities can benefit financially and in prestige from high-profile teams, especially if they perform well, but these programs can be expensive and do not necessarily serve all students. The same is true of many other types of university spending on what are broadly termed "student services." As the higher education industry has become more and more competitive, with institutions seeking to lure prospective students by providing an ever-widening array of amenities, some have suggested that too many tuition dollars are spent on marketing and "window dressing" intended to attract new students. Numerous examples of seemingly lavish amenities have been circulated in the media, including climbing walls for students to exercise on, golf courses and spas, and swimming pools built into residence halls. This "luxury arms race" has, according to critics, reached a point at which some college and university recruitment brochures appear more akin to country clubs than to institutions of higher learning. Studies have shown that higher-income and lower-performing students tend to choose the schools with extra amenities over those that put a stronger value on academics.

College tuition has occasionally become a political issue for reasons having nothing to do with its rising price tag. The importance of the issue of immigration reform during President Barack Obama’s second term brought to the forefront of public thought the provision of services to undocumented persons. One such benefit frequently discussed is the provision of in-state tuition rates to undocumented students. Traditionally, publicly funded colleges and universities have charged students different rates of tuition depending on whether or not the student is a resident of the state in which the institution is located; students who are in state pay less than students who are out of state. The rationale for this difference is that students from within the state where the institution is located have already, either personally or through their parents or caregivers, paid taxes to support the institution, while out of state students have not. The issue of in-state tuition affects undocumented persons when they seek to attend a college or university located in the state they are residing in. Undocumented students often have difficulty receiving in-state benefits because they often lack proof of their residency. In several states, public sentiment has favored implementing policies granting in-state tuition to undocumented immigrants.

College tuition is expected to remain a hot-button issue as millennials and younger generations struggle to maintain the standard of living they grew up with while paying off sizable student loans, all in an economy with low wages compared to inflation rates. The federal government has taken steps to intervene by providing some form of relief for those carrying substantial student loan debt, similar to the assistance the government provided to many homeowners in the aftermath of the mortgage crisis. The Obama administration, for example, introduced the option of Income Based Repayment (IBR) for some student borrowers; through IBR, student loan repayment was made easier because the amount of each payment due is determined by calculating a percentage of the borrower’s disposable income. Another option is the Public Service Loan Forgiveness (PSLF) plan, under which borrowers opt to work for nonprofit organizations while making regular payments on their debt for ten years; at the end of the ten-year period, if the borrower still has outstanding student loans, these are waived.

Calls for student loan forgiveness continued as the national student loan debt in the US continued to grow, increasing by 5 to 7 percent each year between 2010 and 2020. In 2020, amid the onset of the global COVID-19 pandemic, the US government suspended student loan payments in an attempt to help borrowers navigate the recession brought on by the pandemic. This payment pause began during the presidency of Donald Trump and was extended multiple times during the presidency of Joe Biden; however, Biden's attempts to create a national student loan debt relief plan ultimately failed.

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