Reasons For Rapid College Cost Inflation

More than forty years later than the first increases, tuition at American colleges and universities continues to surge ahead—much faster than the inflation Dunlop cited. This fall, Harvard's annual tuition and fees (not including room and board) will set you back $45,278, more than 17 times the 1971-72 cost. If annual increases had simply tracked the inflation rate since 1971, next year's tuition would be to just $15,189.

The average cost of tuition and fees at a private, non-profit, four-year university this school year was $31,231—up sharply from $1,832 in 1971-1972 (in current dollars). At public, four-year schools, tuition and fees cost about $9,139 this year. In the 1971 school year, they added up to less than $500 in current dollars, according to the College Board. “If you look at the long-term trend, [college tuition] has been rising almost six percent above the rate of inflation," said Ray Franke, a professor of education at the University of Massachusetts, Boston. "That's brought immense pressure from the media and general public, asking whether college is still worth it."

But after decades of expanding enrollments, applications have begun tapering off. College enrollment peaked in 2011. With millions of recent debt-burdened college graduates still underemployed by one of the worst recessions on record, many students and their families are wondering why tuition keeps rising, and how much higher it will go. Meanwhile, the ongoing rise in costs have stretched families' capacity to pay for college to nearly the breaking point.

In 1971, for example, Harvard's $2,600 tuition amounted to about 13 weeks' worth of the median household's annual income of $10,285. Today, the median household needs to work for almost a year to pay the full sticker price. To make up the gap, millions of students and families every year are forced deeper into debt to make up the difference—around $100 billion a year is borrowed through a cottage industry of private and publicly-funded loan programs.

On the cost side, schools continue to compete for students by working to attract top faculty, build and maintain the latest facilities and offer the next generation of students amenities that can be touted on campus tours for prospective applicants. Among the most selective schools, amenities have become an important part of the race for the best and brightest, and well-off, applicants, according to Robert Kelchen, a professor at Seton Hall University's Department of Education.  "Schools are all going after a fairly small pool of students who are high achieving and high income and able to pay much of their own way to college," he said. "They're trying to build more amenities—so you hear about the rock climbing walls and the lazy rivers."

Over the decade from 2001-2011, the share of expenses devoted to "student services" rose from 17 percent of the average school's budget to 20 percent, according to a comprehensive review of college-spending patterns by the Delta Cost Project at American Institutes for Research. The research covered decades of data from thousands of American public and private colleges and universities. The rising cost of college sports including generous coaching salaries—has also raised concerns, especially when tuition subsidizes money-losing programs and increases the financial burden on students who don't take part in athletics.

Higher education payrolls have also been rapidly adding non-teaching jobs in recent years. Public and private colleges and universities expanded their payrolls by 28 percent between 2000 and 2012, more than 50 percent faster than the previous decade, according to an analysis of higher education staffing by the Delta Cost Project. That build-up largely tracked the rise in enrollments. “Many of these new positions appear to be providing student services, but whether they represent justifiable expenses or unnecessary 'bloat' is up for debate," wrote Donna Desrochers, the report's principal researcher.

Meanwhile, teaching salaries, one of the biggest single line items, have remained relatively flat—much like those across most of the U.S. labor market. Despite heavy spending by a handful of top universities for the most talented, grant-winning researchers, most schools aren't seeing big wage pressures, largely because teaching jobs are in high demand. 

So if the cost of providing an education has remained fairly stable, why does the price students pay keep rising? 

The reason, say researchers, is that deep budget cuts in state funding for public higher education and shrinking subsidies at private schools have pushed a greater share of the cost onto students and their families.

Knobull suggests added details at: https://www.cnbc.com/2015/06/16/why-college-costs-are-so-high-and-rising.html