College tuition in the United States is the cost of higher education collected by educational institutions in the United States, and paid by individuals. It does not include the tuition covered through general taxes or from other government funds, or that which is paid from university endowment funds or gifts. Tuition for college has increased as the value, quality, and quantity of education have increased. Many feel that increases in cost have not been accompanied by increases in quality, and that administrative costs are excessive. The value of a college education has become a topic of national debate in the U.S.
History Under the Tenth Amendment to the United States Constitution, the powers of the federal government are limited to those mentioned explicitly in the Constitution. As education is not mentioned, educational policy and schools are state matters in the United States. The federal government operates military academies, but there is no national university nor national academic standards. The development of national standards has been driven from outside, especially the accounting industry, as more and more money became involved.
An important predecessor was the Morrill Act of 1862, which provided for land-grant colleges using surplus federal lands recently acquired.
The size and cost of U.S. public higher education increased dramatically after World War II with the introduction of the G.I. Bill and greater federal funding for higher education. Policy makers believed that university-based research had played a critical role in determining the outcome of World War II and would be essential for success in the Cold War. With the launch of the Sputnik satellite by the Soviet Union, many feared that the United States was falling behind on science and technology because it relied on private wealth to fund higher education, in contrast to the Soviet system, which was publicly funded and perceived by some to be more meritocratic and more closely tied to the needs of the economy and the military. In the United States, many families were unable to borrow sufficient funds to finance a high-quality education for their children, and to thereby increase their children's earning capacity and standard of living, until after the introduction of federal student loans. As public subsidies fell and costs and quality of education increased, loans played an increasingly important role in higher education finance.
During the late 1960s, as the nation's economic growth slowed, the question of who should pay for higher education came under fresh political scrutiny. Decades-old no-tuition policies at some campuses fell by the wayside as politicians promoted new austerity policies. In California, Governor Ronald Reagan promoted cuts to higher education as a way to win favor with business interests and conservative voters. He justified tuition as necessary given voters' aversion to any increase in taxes. In New York, federal and state politicians forced austerity on New York city to satisfy bond holders. New York reformers claimed that The City University of New York's longstanding no-tuition policy was no longer financially feasible. In the context of a stagnant economy and a growing conservative movement embracing austerity, no-tuition policies fell out of favor in many areas of the country during this period.
Overview of tuition rates in the U.S.
The United States has one of the most expensive higher education systems in the world, Public colleges have no control over one major revenue source: the state budget. In 2023–24, the weighted average list price for annual tuition in the United States ranged from an average of $11,260 for in-state students at public four-year institutions to $41,540 for private four-year institutions.Ma, Jennifer and Matea Pender (2023), "Trends in College Pricing and Student Aid 2023", New York: College Board. Due to the high price of college tuition, about 43 percent of students reject their first choice of schools.
Tuition and fees do not include the cost of housing and food. For most students in the US, the cost of living away from home, whether in a dorm room or by renting an apartment, would exceed the cost of tuition and fees. In the 2024–2025 school year, estimated cost of undergraduate room and board ranges from $13,000 to $15,000 for both public and private four year institutions.
Causes of tuition increases
Cost shifting and privatization
Between 2007–08 and 2017–18, published in-state tuition and fees at public four-year institutions increased at an average rate of 3.2% per year beyond inflation, compared with 4.0% between 1987–88 and 1997–98 and 4.4% between 1997–98 and 2007-08. One cause of increased tuition is the reduction of state and federal appropriations to state colleges, causing the institutions to shift the cost over to students in the form of higher tuition. State support for public colleges and universities has fallen by about 26 percent per full-time student since the early 1990s. In 2011, for the first time, American public universities took in more revenue from tuition than state funding."Trends in College Spending 1998-2008 " Delta Cost Project. Critics say the shift from state support to tuition represents an effective privatization of public higher education."Public Universities Relying More on Tuition Than State Money", The New York Times About 80 percent of American college students attend public institutions.
Critics also note that investments in higher education are severely tax disadvantaged compared to other investments. Heavy taxes and inadequate subsidies to higher education contribute to underinvestment in education and a shortage of educated labor, as demonstrated by the very high pre-tax returns to investments in higher education.
Bubble theory
The view that higher education is a bubble is controversial. Most economists do not think the returns to college education are falling. On the contrary, they appear to be both increasing and much higher than the returns on other investments such as the stock market, bonds, real estate, or private equity.
One rebuttal to the claims that a bubble analogy is misleading is the observation that the 'bursting' of the bubble are the negative effects on students who incur student debt. For example, 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, 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."
Student loans Another proposed 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 they began, but deeper in debt. College fees begin to accumulate when people start college, such as orientation and freshman fees, and additional charges upon your departure, such as senior and commencement fees. In 1987, then-Secretary of Education William Bennett argued that "... increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase."Bennett, William J. "Our Greedy Colleges." Nytimes.com. The New York Times Company, 18 Feb. 1987. Web. 28 Apr. 2016. This statement came to be known as the "Bennett Hypothesis."
The nonpartisan New York Fed studied the effect of increased loan supply on tuition following large policy changes in federal aid program maximums available to undergraduate students that occurred between 2008 and 2010 found "that institutions that were most exposed to these [loan limit] maximums ahead of the policy changes experienced disproportionate tuition increases around these changes, with effects of changes in institution-specific program maximums of Pell Grant, subsidized."
However, many empirical studies that have tested the effects of student loans on college tuition find no evidence of an increase in tuition, especially net of scholarships and after taking into account increases in the quality of education funded by increases in tuition. Moreover, the widespread availability of private student loans makes it unlikely that public student loan availability limits demand for education.
An additional rebuttal to the student loan theory is the fact that even in years when loan limits have not risen, tuition has still continued to climb, and tuition has increased more at public institutions than at private institutions. Public college tuition has jumped 33 percent nationwide since 2000.
One recent working paper posted online by the Federal Reserve Bank of New York in 2015 (revised in 2016) concluded that undergraduate institutions more exposed to increases in student loan program maximums tend to respond with modest raises in tuition prices.Lucca, David O., Taylor Nadauld, and Karen Shen. "Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs." Newyorkfed.org. Federal Reserve Bank of New York, Mar. 2016. Web. 19 Apr. 2016. The working paper has not yet been subject to peer review.
Lack of bankruptcy protection A third, novel theory claims 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.) strips students of the ability to declare bankruptcy, and, in response, the lenders and colleges know that students, defenseless to declare bankruptcy, are on the hook for any amount that they borrow, including late fees and interest, which can be capitalized and increase the principal loan amount, thus removing the incentive to provide students with a reasonable loan. However, changes in the availability of bankruptcy discharge for private student loans caused no changes in the pricing or availability of private student loans, suggesting that this theory is implausible.
Additional factors
Other factors that have been implicated 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 means that 'paying' students have to 'make up' for the difference: increased tuition. According to Inside Higher Ed, a 2011 report from the National Association of College and University Business Officers explains more about the practice of tuition discounting. The article notes that "while the total amount spent on institutional aid for freshmen rose, the average amount that institutions spent per student actually dropped slightly" and gives, as one possible reason for the drop, that between 2008 and 2011 "colleges and universities had to lower the amount they gave to each student to help cover a larger number of students." According to Mark Kantrowitz, a recognised expert in the 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."