3 Signs That College Tuition Won’t Get Any Cheaper

Written By:

Anyone who has recently attended college, or who has a child attending college, or who has a child who  might one day want to attend college, has noticed an essential fact about college, which is: college is really, really expensive.

College tuition keeps getting more and more expensive with each passing year. Students are borrowing record amounts of money to pay for their college educations, sometimes leaving them with unsustainable monthly payments that make it hard to buy a house, start a family, or take part in other milestones of traditional middle-class adult life.

A recent report from The Daily said that college for newborn babies (born in 2012) could cost as much as $422,000 (in 2012 dollars) for a four-year degree by the year 2034.

As college gets more expensive, what are we supposed to do about it? Is there any alternative to going into debt to pay the ever-escalating costs of a university education?

Although many families might wish there was a magic bullet solution to make college more affordable, the truth is that college tuition is likely to keep rising for years to come.

[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.

Here are three warning signs that indicate why college is going to keep getting more expensive:

College costs have been going up for a long time:

Ever since 1990, college tuition has increased by almost 300% – faster than any other commodity, good or service in the Consumer Price Index. For example, the cost of health care has increased by 150% since 1990, meaning that college costs have gone up twice as fast as those of health care (which is often cited as an example of out-of-control costs). The increase in college costs is part of a long-term trend.

The government cannot reduce the price of college tuition:

America’s system of higher education is based on a complex foundation of public subsidies (paid for with tax dollars), private donations and tuition paid by students. The government also provides federal student loans to enable students to pay for college when they otherwise could not afford it. Although this system is meant to make it possible for more people to attend college (which is an admirable goal) it also has the unintended consequence of driving up costs. This blog article by Kevin Carey explains how the system works, using the metaphor of “if college educations were like apples.” If apples were sold for a dollar each, and the government wanted more people to be able to buy apples, they might offer a 40 cents per apple subsidy to the apple sellers (i.e. the colleges). But over time, what if the government needed to cut funding for the subsidies, and moved the subsidy down to 30 cents per apple? (This is happening with colleges, as states cut their funding to state universities.) To make up for the lost revenue, apple sellers would increase the price of apples. We’re seeing the same thing happening with college tuition, and it’s not likely to stop anytime soon.

College is still “worth it:”

For the most part, despite some difficulties faced by recent graduates who are struggling to find jobs in a tough economy, a college education appears to be a genuinely good investment. College graduates are less likely to be unemployed than people who have only graduated from high school. College graduates tend to earn significantly more money over the course of their lives. Student loans are no fun, but by most measurable standards, you’re better off with a college degree than without. As long as college delivers a solid return on investment, more students will keep going to college – and colleges will be able to keep raising tuition to meet the rising demand.

What does the future hold for college tuition? Some people think we are in a “college tuition bubble,” where college tuition has become overvalued, just like the housing market was a few years ago. Other economists and analysts argue that college, despite being expensive, is actually underpriced: Kevin Drum argues that a fair market price for college tuition would be about $75,000 per year.

Perhaps future innovations in online learning and technology will drive down the cost of college by opening up new competition. We’ve seen this kind of “new way of learning” from online colleges like University of Phoenix and Full Sail University.

But in the meantime, parents might need to adjust their children’s expectations. Maybe four full years of living on campus in a dorm room and going to Saturday football games will become an unaffordable luxury for most families.

[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.

Perhaps in the future, we’ll see more 18-year-olds living at home with mom and dad and doing a few years of community college before they finish their four-year degree.  A college degree is still worth the investment, for most people – but that doesn’t mean you can’t save some money along the way.

Whether your personal finances are more like a college student or an adult learner, Quizzle.com can help you save more money and increase your net worth. We offer free personal finance tools and resources to help you create a stronger financial foundation, set a budget, improve your credit, and save more money.