the cost of higher education
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The Cost of Higher Education 0
The Cost of Higher Education: an analysis and case study
Jenny BurnsCreighton University
MLS 675December 16, 2004
The Cost of Higher Education 1
Introduction
The increasing cost of higher education in the United States has been a continuing topic
for debate in recent decades. American society emphasizes the importance of education after
high school, yet the cost of undergraduate and advanced degrees continually rises at a greater
rate than inflation. According to the Advisory Committee on Student Financial Assistance, cost
factors prevent 48% of college-qualified high school graduates from pursuing further education
(McKeon, 2004, p. 45). The current system requires the majority of students to accumulate
extensive debt with the expectation that they gain lucrative post-graduate employment to repay
their loans.
The cost of higher education raises several ethical issues. Among these are the
perpetuation of the cycle of debt in American commercial society, the hierarchy of differing
higher education institutions and cost, and the resulting socioeconomic and racial inequities in
college demographics. Both an examination of the current trends and figures and a closer look at
a real life example show the troublesome state of higher education and its effect on our
commercial society.
The Facts about Cost, Financial Assistance, and Loans
Research indicates a steep upward trend in the cost of higher education throughout the
20th century. In recent decades, America has witnessed a widening gap between inflation and
tuition. An incoming freshman at a typical college incurs charges for tuition, university fees,
books, room and board, and other miscellaneous items. During the 1999-2000 academic year the
total cost of attendance for full time undergraduates at a 2-year institution averaged $9,083, a 4-
The Cost of Higher Education 2
year public institution equaled $12,601, and a 4-year private institution totaled $23,617 (Berkner,
2003, p. 75).
U.S. Department of Education, National Center for Educational Statistics, 1999-2000
Institution Type Tuition and fees $ Non-tuition expenses $ Total price of attendance $Public 2-year 1,558 7,525 9,083Public 4-year 4,251 8,354 12,601Private not-for-profit 15,031 8,570 23,617Private for-profit 8,919 9,438 18,360
(Berkner, p. 73)
Since the mid 1980s, student fees have increased at a rate approximately double the rate of
inflation (Hauptman, 1997, p. 24). A 1996 study by the General Accounting Office indicates a
234 percent increase in tuition and fees at public institutions and a 220 percent increase at private
universities since 1980. This compares to an 80 percent increase in inflation since 1980 (Barry,
1998, p. 39). Families today spend a considerably larger percentage of their family income on
college than families two decades ago. In 1979, the average four-year tuition at a public college
consumed approximately 36 percent of a family’s annual income, while a private university
consumed 84 percent. By 1994, the percentages jumped to 60 and 156 respectively (Reiland,
1996, p. 36). In addition to increases in tuition, an attitude shift in regard to paying for college
contributes to the problem of financing higher education. Parents today are more likely to
budget college expenses out of their annual income instead of from savings, and students are
expected to contribute more to financing their own education than in the past (Kiesler, 1994, p.
67).
Institutions of higher learning in America face the daunting task of competing to meet the
expectations of today’s college student while finding sufficient resources to keep costs within
reach of today’s family. The four major sources of revenue for colleges and universities in the
The Cost of Higher Education 3
United States include: state and local funding, the federal government, tuition and fees, and
endowment income and private giving (Hauptman, p. 22). The percentage of revenue from each
of these sources changes according to economic trends and varies depending upon the type of
institution.
Trends in Major Revenue Sources Since 1980 Percentage Change
Revenue Source 1980-1986 1986-1991 1991-1996Tuition and fees 77 61 49Federal government 30 38 22State and local government 52 34 14Endowments/gifts 60 50 42Sales and services 71 67 25Other sources 50 67 40Total current fund revenues 58 50 29Inflation rate 31 21 17
(Hauptman, p. 23)
Annual tuition hikes today are less than they were in the 1980’s, but tuition increases still exceed
the rate of inflation. Tuition remains the largest source of revenue for colleges and universities
in the United States.
Research indicates a number of factors that contribute to increasing the overall cost of
higher education. Colleges and universities have drastically increased their costs without seeing
an equal growth in their sources of revenue. The greatest increase in higher education costs in
the last 75 years has been seen in administrative costs. According to the National Center for
Education Statistics, in the last twenty years these costs grow annually by 19 percent—four times
the growth of expenditures on teaching (Reiland, 1996, p. 36). Civil rights regulations and
federal mandates, (including the Americans with Disabilities Act, the Student Right to Know
Act, and Campus Security Act), plus efforts to increase racial and ethnic diversity require
universities to employ additional administration and staff (Reiland, p. 36). In the past twenty
years faculty and staff members and their salaries have increased significantly. In the past two
The Cost of Higher Education 4
decades, faculty members increased by 30 percent and non-faculty members grew by more than
60 percent. Student-faculty ratio and class size are two major rating criteria for American
universities. The American Association of University Professors found that average salaries for
faculty members at public universities rose by 108 percent between 1980 and 1993, and salaries
at private universities surged 134 percent—nearly double the rate of inflation (Reiland, p. 36).
Colleges also require additional expenses in competing to attract potential students and meet
higher student and parent expectations. Colleges are judged by their academic qualifications,
health services, sports facilities, dorms, campus recreation centers, cafeterias, and other
amenities.
In order to attain diversity goals and keep enrollment numbers up, colleges and
universities offer financial aid packages and scholarships to students. Students received
approximately $50 billion in financial aid during 1995-1996 from federal, state, institutional, and
private sources (Hauptman, p. 26). According to the U.S. Department of Education 1999-2000
National Postsecondary Student Aid Study, 55 percent of undergraduates received some form of
financial aid (Berkner, p. 93). Federally-funded student financial assistance made up the highest
percentage for student aid during the 1999-2000 academic year, with 41.7 percent of students
receiving federal aid. Institutional grants took second at 37.5 percent (Berkner, p. 53).
Percentage of All 1999-2000 Undergraduate Receiving Financial Aid Federal grants State grants Institutional grants Private grants
% Ave. $ % Ave. $ % Ave. $ % Ave. $Any aid 41.7 2,063 24.6 1,681 30.1 3,722 12.5 2,051Any loan 43.7 2,218 24.3 2,004 29.5 4,574 11.4 1,970Any grant 52.0 2,063 30.7 1,681 37.5 3,722 15.6 2,051
(Berkner, p. 53)
Although the amount of money given to students in the form of financial aid and grants has
increased in the last decade, these numbers seem less impressive in real dollar value. Major
The Cost of Higher Education 5
federally funded grant programs, the Pell Grant and the Supplemental Educational Opportunity
Grant, make up a large portion of the federal student assistance. Though funding for the Pell
Grant has increased in the last two decades, its buying power has remained the same, taking into
account the increased cost of college and the number of recipients (Hauptman, p. 26). The 2005
federal budget increases the Pell Grant by less than 10 percent, which falls short of the double
digit tuition hikes seen in institutions across America (Malveaux, 2004, p. 39).
Private universities succeeded in the 1980’s with a high-tuition high-aid approach that
capitalized on high inflation by reinvesting a larger percentage of higher tuition dollars into
financial aid (Hauptman, p. 30). Their goal was to increase revenue and student diversity.
Private universities are currently reevaluating this strategy because high tuition high aid squeezes
out the middle class, who often do not qualify for financial aid and cannot afford high tuition.
Public institutions faced with lower levels of state funding may look to model this strategy to
take advantage of students willing to pay more while maintaining affordability and diversity.
The increase in tuition and fees plus the lack of parental savings for college has led to the trend
for college students to finance their higher education through loans. The College Board in 1996
published data showing that loans comprised over half of the total financial assistance for
students, reaching approximately $30 billion of debt every year (Hauptman, p. 27). Not only the
amount of student debt, but the drastic increase in undergraduate loans in the last decade show
cause for concern. The $103 billion of total undergraduate loans from 1990-1995 surpasses the
debt of all college students from the previous three decades combined (Elfin, 1996).
The Cost of Higher Education 6
(Hauptman, p.27)
Trends in Student Aid 2003
(Financing, p. 41)
Case Study Comparison
Most of the documents on the topic of higher education costs and its toll on families and
college students contain information on overall trends and averages. As a recent graduate of
Creighton University and a first-year graduate student, my personal financial situation offers a
real life example on this issue. I received a partial academic scholarship and a full athletic
scholarship to play basketball for Creighton University. The remaining charges for room, board,
tuition, fees, and books after my academic scholarship were all financed through the athletic
The Cost of Higher Education 7
department at Creighton. I currently work for the athletic department as a graduate assistant
women’s basketball coach. As part of my job, I receive free tuition and fees at Creighton for my
master’s degree. Very few people graduate with bachelor’s and master’s degrees from a private
university without paying any tuition or fees. Because of the rarity of my situation, I can
compare my financial life now with what it would have been without a full scholarship.
Fortunately, my skills as a basketball player allowed me to graduate from a top-rated
private university without acquiring any debt. Without the scholarship my life and the choices I
have made would have been drastically different. My parents did not save for my college
education; thus, without scholarships, I would have incurred extensive school loans. Currently,
the College of Arts and Sciences at Creighton costs $19,746 in tuition, $764 of fees, and
approximately $7,500 for room and board annually. I spent four and a half years at Creighton
with the total cost of my education equaling approximately $125,000. Without an athletic
scholarship, my financial situation would be remarkably different. If I worked a part time job
while in college and still received the Karl M. Reinart academic scholarship of $5,000 a year, I
would have needed to finance three fourths of the remaining costs in a loan of approximately
$71,250. If I took ten years to pay off my loan at five percent interest, I would be making
monthly payments of $756 after graduation and would have to pay back an additional $19,436 in
interest on top of the $71,250 I borrowed.
The numbers are even more staggering when considering graduate school. To finish the
36-hour masters program in two years at Creighton it costs a total of $21,940, which does not
include living expenses. If I were not on a full-tuition scholarship and financed my master’s
degree in addition to my undergraduate loan, I would be $93,190 in debt. In order to pay
The Cost of Higher Education 8
everything back within 15 years I would need to make monthly payments of $737 and have to
pay back an additional $39,459 in interest.
Realistically, like many middle-class Americans, I simply could not and would not have
been able to afford to go to school at Creighton. Without an athletic scholarship I would have
attended a more moderately-priced state school, such as the University of Minnesota. The yearly
costs for the University of Minnesota total $11,347, which includes $8,029 in tuition, $1,865 in
campus housing, and $1,453 for a meal plan. The cost of a four year degree for an in-state
resident equals approximately $45,388. Although the cost is significantly less than Creighton, I
would still have needed to finance approximately one third of the costs through a loan. If I took
out a loan of $30,250 at five percent over a ten year time frame I would make monthly payments
of $321 and pay back an additional $8,252 in interest. Adding a master’s degree from the
University of Minnesota increases those numbers to a loan of $49,300, monthly payments of
$523, and interest totaling $13,488. With this financing plan a four-year and master’s degree
from the University of Minnesota, including interest payments, costs approximately $77,926.
Ethical Issues Concerning the Cost of Higher Education
The cost of higher education in America is a controversial issue today, in large part,
because of the ethical issues it raises. Our society places an emphasis on the importance of
higher education, yet the cost of college and advanced degrees continues to climb. In order to
achieve social and economic success in our society it is imperative to obtain schooling beyond
the high school level. With few exceptions, this requires a person to take out extensive loans,
thus entering the cycle of debt that most Americans never break. Our commercial economy’s
system of inflation and interest rates creates the reality that most college students and/or their
The Cost of Higher Education 9
families pay not only for the education, but large amounts of interest as well. The notion of
paying back large sums for tuition, fees, room and board, etc. becomes even more challenging
when considering an interest rate of five percent or more.
In the last two decades tuition rates have made a significant jump, far exceeding the
increases in inflation in many cases. College students have more options for student aid,
scholarships, and financing than in the past, but in many cases this assistance has not increased in
real dollar value and is only available to minorities and lower-class students. The high-tuition,
high-aid-strategy used by American colleges has had the greatest negative impact on the middle-
class student, who does not qualify for assistance and cannot afford high tuition prices.
The discrepancy in cost for different types of schools also raises an ethical issue.
Generally speaking, the more competitive a university, the more it costs a student to attend.
State schools, community colleges, and trade schools cost considerably less that private
universities. High costs successfully exclude capable lower-and middle-class students who do
not qualify for school grants from prestigious institutions like Harvard and Yale. There is a
definitive correlation between an institution’s educational rating and the ticket price. The 2005
edition of Barron’s Profiles of American Colleges lists colleges and universities in both a cost
range directory and according to the level of competitiveness. Fifty-four of the 70 colleges listed
as most competitive and 65 percent of colleges listed as highly competitive fell in the $26,000 a
year and higher price range (Barron, 2004). The colleges designated as less competitive fell in
the lower price rages. Earning a marketable and valuable degree from a competitive institution
just is not within financial reach of the majority of Americans. Thus, under the current American
higher education system, the rich stay rich and the middle and lower classes continue to struggle.
The Cost of Higher Education 10
Conclusions
The controversy surrounding increases in cost of higher education has many Americans
questioning the value of education and searching for better options. Studies indicate that college
graduates in 1980 earned an average of 40 percent more than high school graduates, and in 1990
that number grew to 75 percent (Reiland). On the flip side, Emily Feistritzer, the Director of the
National Center for Education, stated that of the 29 million people 25 years of age and older with
a college degree, 5.8 million held jobs that did not require a college degree (Reiland, p. 36).
Despite hikes in tuition, more people are attending college today than ever before and flooding
the job market. Unfortunately, this equates to higher competition for college level jobs.
Percentage of the Population Enrolled in Higher Education
(Hauptman, p. 21)
Kristina J. Shelley, a Bureau of Labor Statistics specialist, estimates that “at least 22 percent of
all college graduates entering the work force between 1994-2005 were or will be either
unemployed or in jobs for which a bachelor’s degree is not ordinarily considered a necessity”
(Elfin, 1996).
The increase in the cost of higher education reflects a shift in perspective. People now
view college and advanced degrees as an investment rather than merely a pursuit of knowledge.
Debt is considered an acceptable and natural part of our commercial economy. Seventy-five
percent of undergraduate students own at least one credit card, 45 percent carry a balance, and
The Cost of Higher Education 11
the average balance is greater than $3,000 (Laurence, 2003, p.3). This attitude will cause
problems in the future with a glut of debt-ridden college-educated people competing in a limited
job market.
The Cost of Higher Education 12
Resources
Barron. (2004). Profiles of American Colleges, 2005 edition. Barron’s Educational, 2004, (46-51, 237-247).
Barry, J.S. (1998, winter). Rigging the price for higher education. Academic Questions, 11. Retrieved November 28, 2004 from Academic Search Premier.
Berkner, L. et al. (2003, March). Student financing of undergraduate education, 1999–2000. Natl. Postsecondary Student Aid Study. Natl. Center for Education Statistics. NCES 2002-167. Retrieved December 5, 2004 from, http://www.nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2002167.
Elfin, M. (1996, September). The high cost of higher education. U.S. News & World Report, 121. Retrieved November 29, 2004 from Academic Search Premier Database.
Financing higher education. (2004, spring). New England’s Journal of Higher Education & Economic Development, 41-44.
Hauptman, A.M. (1997, spring). Financing American higher education in the 1990’s. New Directions for Institutional Research, 93, 19-35
Kiesler, C. (1994, July). What’s behind soaring college costs? USA Today, 123, 66-67. Retrieved November 29, 2004 from Academic Search Premier Database.
Laurence, D. (2003, winter). Notes on the English major. ADE Bulletin 133, 3-5.
Malveaux, J. (2004, July). Will tuition become a campaign issue? Black Issues in Higher Education, 21. Retrieved November 30, 2004 from Academic Search Premier Database.
McKeon, H. P. (2004, January). Intervention is needed. USA Today, 1/5/04.
Reiland, R. (1996, September) Deconstructing the ivory tower. National Review, 48, 36. Retrieved November 29, 2004, from Academic Search Premier Database.
Through a different lens: A new angle on the price spiral in higher education. (2000, January/February). The National Center for Postsecondary Improvement.
University of Minnesota. (2004). Retrieved December 12, 2004 fromhttp://www1.umn.edu/twincities/01_about.php