Why Tuition And Fees Are Still Rising Faster Than Financial Aid for 2025

by Imed Bouchrika, Phd

Co-Founder and Chief Data Scientist

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Attending college is costly. The tuition costs are staggering as well as the room and board fees and the cost of transportation, fueled by today’s high inflation. As such, the amount of student loan debt Americans have accumulated has ballooned—now nearly $1.6 trillion (Federal Reserve Bank of New York, 2020). Recent data shows that higher education costs come as one of the latest expenses individuals deal with. But it was not always this way.

In this article, we will see just how the cost of college kept rising over the decades and why tuition increases every year even as financial aid lags behind. We will discuss the different reasons that can provide more insight into why does the cost of college keep rising, what factors affect the cost of matriculation, why it potentially causes students to drop out, and what can future generations of students do to pursue their college degrees without accumulating insurmountable student debt.

Why Tuitions Increase Every Year: Table of Contents

1. Cuts in State Funding
2. Demand for College Education
3. Stagnating Wages
4. How Administrative and Facility Costs Impact Tuition
5. How Can Health Professions Student Loans Mitigate Unique Educational Expenses?
6. What Are the Most Affordable Bachelor's Degree Programs?
7. Do Accelerated Bachelor's Degree Programs Provide a Cost Advantage?
8. How to Make College More Affordable
9. Can Accelerated Degree Options Reduce Overall Education Costs?
10. Can Graduate Education Offset the Financial Burden of Rising Tuition?
11. What role do private loans play in bridging financial aid gaps?
12. Are Student Loans for Bad Credit a Reliable Option?
13. How Do Cosigner Release Options Impact Your Student Loan Repayment?
14. Can Online Education Provide a Cost-Effective Alternative to Traditional College?
15. Can Online Education Offer Cost Advantages for Working Adults?
16. The Influence of Specialized Training Programs on College Costs

According to the latest Trends in College Pricing report of the College Board, the average published (sticker) tuition and fees charges for full-time undergraduates at private nonprofit four-year institutions is $37, 350 for SY 2020-21. This reflects an increase of 2.1% and a difference of $770 compared to charges in 2018-19, which was $36,880.

For public four-year out-of-state institutions, the increase is 0.9% with an additional cost of $250 from $26, 770 to $27, 020. The increase in public four-year in-state schools is 1.1% with an extra $120 from $10,440 to $10, 560; and public two-year in-district schools is 1.9% with an increase of $70, from $3,700 to $3,770.

These tuition and fees increases are not only true for the recent two years. According to the College Board, these charges have risen about 3% every year through the last decade. From 1990-91 and 2020-21, the average published tuition and fees increased from $18, 560 to $37, 650 for private nonprofit four-year institutions; from $3,800 to $10, 560 for public four-year institutions; and from $1, 810 to $3, 770 for public two-year institutions (Ma, Pender, and Libassi, 2020).

The costs mentioned are only for tuition and fees. There are of course other expenses associated with going to college, such as living expenses and budgets for school supplies. Altogether, you can imagine why students’ accumulation of huge student loans and why the debate whether a college degree is still worth it have become highly controversial issues.

Cuts in State Funding

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“Contrary to the popular notion that higher education institutions are price gouging students and their families, a study done by the Center on Budget and Policy Priorities (CBPP) found out that deep cuts to state funding in the last decade are one of the main reasons behind tuition fee increases and surging college costs (Mitchell, Leachman, and Saenz, 2019). State funding for higher education drastically fell during the Great Recession and has not picked up since, leaving little room for students looking for financial aid. For example, figures from 2018 showed that overall state funding for public two-year and four-year institutions is still more than $6.6 billion below its levels before the recession fully made its impact in 2008.

Based on 2017-2018 figures, higher education institutions get the biggest portion of their revenues from tuition and fees followed by investments, government grants, contracts, and appropriations (NCES, 2020). Public schools get 41% of their revenue from government sources, private for-profit schools receive 94%, and nonprofit schools receive 31% of revenues from tuition and fees. This is a far cry from three decades ago when revenue from tuition was only a quarter and the rest came from state and local funding.

When state funding goes down, students need to shoulder more of the costs of going to college. This is one of the reasons why does college tuition keep rising. It has not only made it more difficult for students to enroll and graduate but has also contributed to a wider gap between racial and class inequality. Higher costs create stricter barriers to entry into college, which ultimately deter low-income families.

Here are some key points highlighting the cuts on state funding for higher education between SY 2008 to 2018:

• Between SY 2008 to 2018, 41 states spent less per student
• States, on average, spend $1, 220 or 13% less per student
• Nine states cut their spending per student by more than 20%, while six states cut funding by more than 30%
• There are only nine states that increased their funding per student

Demand for College Education

Demand for higher education shows no signs of slowing down even with a glut of graduates. In 2018, 44% of people in OECD countries aged 25 to 34 years old, have a college degree compared to 35% ten years ago (Education at a Glance, 2019). Moreover, in the U.S., the number of college students in the 1990s increased from 13.8 million to 19.9 million in 2019 (NCES, 2019). Meanwhile, enrollment for undergraduate students is projected to increase to 17 million by 2029 (NCES, 2020).

As more students pursue a college degree, demand goes up and prices go up as well. More students mean higher education institutions need to recruit more highly educated faculty and staff who need to be compensated not just with salaries but also other benefits, such as healthcare insurance. In addition, reputation has influenced enrollments in lucrative programs like medical and electrical engineering degrees. Moreover, non-teaching personnel holding top executive positions and receiving six-figure salaries has been a controversial issue.

Apart from instruction-related and administrative costs,  schools also have to contend with the rising costs of providing student services. Services like personal counseling, academic support, and healthcare have been eating up a considerable portion of campus budgets. These factors ultimately impact the final fees the schools charge students.

Stagnating Wages

A study from Pew Research showed that real wages—wages after adjusting for inflation—were higher in 2018 but have the same purchasing power as they did 40 years ago (Desilver, 2018). This means wages cannot keep up with the 3% annual increase in tuition and fees considering that wages only increased by 0.3% between 1989 and 2016. The rising cost of college and stagnant wages amplify the problem of rising college costs since there is not enough income to go around once you factor in other living expenses. This is why most students—even from middle-class families—borrow in order to finance higher education.

The rising cost of living also impacts the overall cost of going to college. Aside from tuition and fees, there are many other expenses related to pursuing higher education. For example, most students move away from their family homes and stay at school dormitories or apartments near campus, which means they need to pay for room and board. Other expenses also include food, transportation, textbooks and other school supplies, equipment and appliances, and school projects and activities fees.

How Administrative and Facility costs Impact Tuition

Administrative and facility expenses have become a significant component driving tuition increases in recent years. As colleges strive to enhance their campuses and meet student expectations, the costs of administrative functions and facility upgrades have risen steadily.

• Administrative Growth and Compensation: The number of non-teaching staff in higher education institutions has increased significantly over the past few decades. Universities have expanded their administrative teams to include roles in student services, compliance, and diversity initiatives. The salaries and benefits associated with these roles, especially at executive levels, contribute heavily to rising operational costs that universities cover through tuition increases.
• Facility Upgrades and Amenities: In an increasingly competitive environment, institutions are investing in amenities such as state-of-the-art gyms, modern residence halls, and enhanced dining facilities to attract students. These investments, while beneficial to student life, add substantial costs to the university’s budget, further pushing up tuition.
• Technology and Infrastructure Maintenance: As campuses expand their digital and physical infrastructure, the costs of maintaining these facilities rise. Technology updates, cyber-security measures, and campus maintenance require ongoing investment. This demand for modernized technology and well-maintained campuses has prompted universities to factor these costs into their tuition rates.

Can Accelerated Degree Options Reduce Overall Education Costs?

Accelerated degree programs offer a streamlined path that can lessen not only tuition expenses but also associated living and opportunity costs by shortening the time to degree completion. Condensing coursework reduces the periods where students incur ancillary expenses, such as housing and textbooks, and accelerates entry into the workforce, thereby enhancing the overall return on investment. Detailed analyses of these programs show that pursuing options like the shortest masters programs online can bridge the gap between maintaining educational quality and managing long-term debt commitments.

Can Graduate Education Offset the Financial Burden of Rising Tuition?

Graduate programs offer enhanced career opportunities that can translate into increased earning potential, providing a strategic counterbalance to escalating tuition costs. A targeted cost-benefit evaluation is imperative when considering advanced degrees, as certain fields demonstrate markedly higher financial returns. For instance, individuals who pursue the highest paying masters degrees often secure substantial salary premiums, effectively offsetting educational debts over time.

What role do private loans play in bridging financial aid gaps?

Private student loans are often a critical resource for students facing gaps between the cost of college and the financial aid available. Unlike federal loans, which have borrowing limits, private loans allow students to borrow more substantial amounts, albeit with varying interest rates and terms.

• Flexible borrowing limits: Private loans can cover costs beyond federal aid caps, including tuition, room and board, and other living expenses.
• Quick access to funds: Students can secure private loans relatively quickly, making them a viable option for unexpected expenses.
• Customizable terms: Borrowers may choose repayment plans that fit their financial situations, though terms depend on creditworthiness and lender policies.

Students should carefully assess their options before borrowing. Exploring the best private student loans can help identify lenders with competitive rates and flexible terms. By combining private loans with other funding sources like scholarships or federal aid, students can strategically manage education costs while minimizing debt burdens.

Are Student Loans for Bad Credit a Reliable Option?

In scenarios where applicants have weakened credit profiles, evaluating alternative financing becomes crucial. Many lenders offer products tailored for individuals with lower credit scores, allowing access to necessary funds despite financial challenges. Prospective borrowers should compare terms and assess risks associated with these options before proceeding. In addition, diversifying funding strategies—such as combining targeted loan products with scholarships or on-campus work opportunities—can help mitigate potential long-term financial setbacks. For an in‐depth evaluation of these tailored loan programs, review student loans for bad credit.

How Do Cosigner Release Options Impact Your Student Loan Repayment?

Cosigner release is a strategic option that enables borrowers to transition to solely responsible loan terms after demonstrating a consistent record of on-time payments. This mechanism can improve post-graduation financial freedom and potentially lead to refinanced loan terms. Before committing, borrowers are advised to assess the specific release criteria set by various lenders, including minimum payment periods and overall credit improvement. For a precise evaluation of products with streamlined cosigner release policies, review lenders offering cosigner release.

Can Online Education Provide a Cost-Effective Alternative to Traditional College?

Online education minimizes costs by reducing infrastructure-related expenses and ancillary fees commonly associated with on-campus learning. Digital platforms enable institutions to streamline operations and offer competitive tuition rates while maintaining rigorous academic standards. This format often results in savings on commuting, housing, and additional campus fees. Students opting for online programs benefit from flexible scheduling and accelerated completion options, which can lead to a faster transition into the workforce. Evaluating program accreditation, support services, and measurable outcomes is crucial when considering this alternative. For a comprehensive review of quality institutions, refer to the best accredited online schools.

Can Online Education Offer Cost Advantages for Working Adults?

Working adults increasingly seek educational opportunities that mitigate both direct tuition expenses and the indirect costs of taking time off work. Online education delivers a flexible pathway by reducing commuting, housing, and ancillary fees while enabling students to continue earning an income. By leveraging digital platforms and asynchronous course delivery, learners can tailor their studies to fit demanding schedules without compromising quality. For data-driven insights into cost-effective options, consider reviewing the most affordable online schools for working adults. This approach not only supports ongoing career development but also provides a strategic alternative to traditional campus-based learning models.

The Influence of Specialized Training Programs on College Costs

The rising cost of specialized training programs, such as professional certifications or niche career preparation paths, is an underexplored factor contributing to the increasing financial burden of higher education. Unlike traditional degree programs that generally follow standardized curricula, specialized training programs often require cutting-edge resources, expert faculty, and industry-specific infrastructure. These additional demands can significantly drive up tuition and associated fees.

For instance, aviation-related education exemplifies the financial challenges of specialized training. Students aiming for careers in fields like aviation must not only fund traditional academic expenses but also account for costs associated with flight hours, simulator training, and aircraft maintenance fees—all integral to earning professional certifications. Many students turn to targeted solutions, such as securing a specialized loan for flight school, to bridge the gap between financial aid and program expenses. These loans can ease the financial difficulties for aspiring professionals but also highlight the systemic reliance on external funding mechanisms to cover specialized educational costs.

As demand for programs in health sciences, technology, and aviation continues to grow, institutions will likely invest more in these high-cost programs, further increasing tuition. Identifying sustainable financial support models for specialized training programs could lessen this burden. Moreover, prioritizing partnerships with industries and government subsidies can play a pivotal role in containing costs while ensuring students still gain access to cutting-edge training.

How Can Health Professions Student Loans Mitigate Unique Educational Expenses?

Health professions programs incur significant costs beyond standard tuition, including specialized equipment, clinical placements, and advanced training materials. Tailored loan options offer lower interest rates and repayment plans designed to accommodate the extended duration of health education. Such programs can supplement traditional financial aid, ensuring that students in competitive health fields have access to funding that meets their distinct needs. For further guidance on managing these expenses, explore health professions student loans.

What Are the Most Affordable Bachelor's Degree Programs?

Students seeking to reduce debt accumulation can explore bachelor’s degree paths that combine quality education with lower overall costs. Non-traditional programs, including certain online formats, may lead to decreased tuition and additional savings on ancillary expenses. Analyzing program structures and delivery methods helps identify options that require fewer campus fees and inflexible overhead costs. Prospective students can also evaluate accelerated degree formats that offer a faster route to graduation without compromising educational outcomes. For further insights on streamlined and cost-effective programs, review the easiest bachelor degree to get.

Do Accelerated Bachelor's Degree Programs Provide a Cost Advantage?

Accelerated bachelor's degree programs condense the traditional curriculum into a shorter period, thereby reducing overall tuition payments, living expenses, and related fees. This format minimizes the time spent accruing costs while expediting entry into the workforce, which can lead to an earlier return on investment. For more details on high-quality options, consider the accelerated bachelor's degree online accredited programs that offer these financial benefits.

How to Make College More Affordable

Looking at the costs associated with going to college, we can clearly see that there is a hefty price to pay, especially for families and students who are already struggling to make ends meet. However, even with these high prices, we also learned that the demand for higher education will not slow down and undergraduate enrollment is projected to continue its uptick in the next decade. This is expected as more and more students realize the value and pay off of a college degree in terms of income and job security. Many students and families are ready to borrow to afford their education, opting to deal with student debt later.

Though it seems that there is no escaping the rising cost of college and why are tuition costs rising, there are things you can do to try and make it more affordable. One thing is to apply for financial aid early and complete all the documents you need for the Free Application for Federal Student Aid (FAFSA). By doing so, you can increase your chances of getting into the many universities that use FAFSA as a way to determine and allocate needs-based awards.

Another way you can lessen the cost of college is to look and apply for local scholarships. Most students tend to check available scholarships from higher education institutions but you can also try to apply for scholarships provided by local organizations. These types of scholarships may not cover one hundred percent of your tuition and fees; however, they are less competitive and can still be a huge help as you pursue your degree.

Obtaining a 529 plan likewise helps since it helps apportion budgets to education. It also potentially reduces the taxes involved in education costs.

Morevoer, comparing the prices of different types of higher education institutions, it can be a good idea to choose a public university. This can significantly reduce the overall cost of going to college. Plus, attending an in-state public institution can provide further savings. Another option is to go to a two-year community college first to complete the required courses for your chosen degree.

When it comes to managing the costs of school materials, you might want to consider renting digital textbooks. You can also buy digital textbooks or loose-leaf formats in order to cut costs. Additionally, you can look for older versions of a particular textbook or use open educational resources if they are available.

Key Insights

• Rising Tuition Costs: The cost of attending college has consistently increased over the past decades, with an average annual rise of about 3%. These increases are not limited to tuition but also include fees and other associated costs of higher education.
• State Funding Cuts: Significant reductions in state funding for higher education have contributed to rising tuition costs. The burden of funding has shifted from the state to students, increasing the financial pressure on families.
• High Demand for Higher Education: The demand for college education continues to grow, with increasing numbers of students enrolling in higher education institutions, which further drives up costs.
• Stagnant Wages: While the cost of college has surged, real wages have remained largely stagnant, making it increasingly difficult for families to afford higher education without resorting to loans.
• Other Expenses: Beyond tuition, students face substantial costs for room and board, transportation, textbooks, and other supplies, which contribute to the overall financial burden of attending college.
• Financial Aid Gap: Financial aid has not kept pace with the rising costs of college, leaving many students with significant unmet financial needs.
• Strategies for Affordability: Students can take steps to make college more affordable by applying for financial aid early, seeking local scholarships, considering public or community colleges, and managing costs for textbooks and supplies.

FAQ

1. Why does college tuition keep rising every year? College tuition rises each year due to several factors, including cuts in state funding, increased demand for higher education, rising administrative and operational costs, and the need to offer more student services. These factors combined push institutions to increase tuition to cover their expenses.
2. How have state funding cuts impacted college tuition? State funding cuts have significantly impacted college tuition by shifting the financial burden from the state to students. As state support decreases, colleges and universities rely more on tuition revenue to cover their operating costs, leading to higher tuition fees.
3. What are the main expenses associated with attending college besides tuition? Besides tuition, college students incur expenses for room and board, transportation, textbooks, school supplies, equipment, and fees for various school projects and activities. These additional costs can significantly increase the overall expense of attending college.
4. How can students make college more affordable? Students can make college more affordable by applying for financial aid early, seeking local scholarships, choosing public or community colleges, renting or buying digital textbooks, and using open educational resources when available. Additionally, creating a budget and managing living expenses can help reduce overall costs.
5. Why is the demand for college education still high despite rising costs? The demand for college education remains high because many students and families recognize the long-term benefits of a college degree, such as higher earning potential and better job security. Despite the high costs, the perceived value of a college education continues to drive enrollment.
6. What role do wages play in the rising cost of college? Stagnant wages have compounded the issue of rising college costs. While tuition and fees have increased significantly, real wages have not kept pace, making it more challenging for families to afford higher education without taking on substantial debt.
7. Are there any legislative efforts to address the rising cost of college? Yes, there are legislative efforts aimed at making college more affordable, such as bills to provide in-state tuition rates for certain students, increase funding for higher education, and expand financial aid programs. However, the impact of these efforts varies by state and institution.
8. Can attending a community college help reduce the cost of higher education? Attending a community college can significantly reduce the cost of higher education. Community colleges typically offer lower tuition rates than four-year institutions, and students can complete general education requirements before transferring to a four-year college to finish their degree, saving on overall tuition costs.
9. What is the impact of financial aid not keeping pace with rising tuition? When financial aid does not keep pace with rising tuition, students face larger funding gaps that they must cover through loans, work, or other means. This can lead to higher levels of student debt and financial strain, making it more difficult for students to complete their degrees and achieve financial stability after graduation.
10. How can students manage the costs of textbooks and supplies?

Students can manage the costs of textbooks and supplies by renting digital textbooks, purchasing used or older editions, utilizing open educational resources, and sharing resources with classmates. Additionally, planning and budgeting for these expenses can help reduce the financial burden.

References:

• Federal Reserve Bank of New York (2020). Household Debt and Credit. New York, NY: Center for Microeconomic Data.
• Mitchell, M., Leachman, M., & Saenz, M. (2019). State Higher Education Funding Cuts Have Pushed Costs to Students, Worsened Inequality. Washington, DC: Center for Budget and Policy Priorities
• Ma, J., Pender, M., & Libassi, CJ. (2020). Trends in College Pricing and Student Aid 2020. New York, NY: College Board.
• OECD iLibrary (2019). Education at a Glance. Paris, France: Organisation for Economic Co-operation and Development.  https://doi.org/10.1787/f8d7880d-en
• NCES. (2019). Back to school statistics. FastFacts. Washington, DC: National Center for Education Statistics.
• NCES. (2020). The Condition of Education: Undergraduate Enrollment. Washington, DC: National Center for Education Statistics.
• Desilver, D. (2018). For most U.S. workers, real wages have barely budged in decades. FacTank. Washington, DC: Pew Research.