It’s no secret that the cost of going to college in the US has been rising—and fast. From 1982 to 2007, tuition climbed 439% while median family income only rose 147%. In the past five years it’s continued apace.
The situation is bad. But it isn’t quite as bad as many media reports portend, because grants, scholarships, and financial aid, which reduce the advertised tuition fees, are also growing fast. Just last month, the National Association of College and University Business Officers reported that colleges in the US are awarding grants and scholarships in the highest volumes ever, enough to make the average cost of school 45% less than the sticker price (paywall). The chart below shows how college costs—both advertised and actual—have changed since 2007, compared to inflation.
But why would schools offer more scholarships instead of simply hiking their prices less? According to Ronald Ehrenberg, an American labor economist, one of the reasons that tution keeps going up is that schools simply aren’t attempting to cut costs (pdf):
With long lines of high quality applicants flocking to their doors, top institutions have chosen to maintain and increase quality largely by spending more, not by increasing efficiency, reducing costs, or reallocating funds…alumni also tend to discourage institutions from cutting almost anything by threatening to withhold contributions.
Perhaps it’s easier for a school to increase its scholarship fund than it is to re-jigger the budget and keep tuition flat.
In any event, the situation is still not good. The actual cost of tuition has still been rising, even as median household income has sunk and public funding for state schools has fallen—by 7% in fiscal year 2012. And, unfortunately, the financial aid that is available often isn’t going to the poorest students who really need it, but instead to those who only need a little extra to cover their tuition, since that way the school can fund more students with the same amount of aid.