Why Higher Education Costs So Much

Surprising nobody, according to the Federal Reserve Bank of New York, the cost of higher education has more than tripled since the 1970s (adjusted for inflation).

Fifty years ago, Harvard (and many private colleges and universities) charged around $2,000 for tuition. Adjusted for inflation, Harvard tuition should be just over $15,000 per year today. Needless to say, Harvard charges nowhere near $15,000. This coming Fall, the sticker price for Harvard is $47,730, roughly triple the inflation-based price

If you scan tuition prices of nearly all the other private colleges and universities from around the country you find that nearly all of them, from local and regional schools to national powerhouses, like Harvard, list tuition right around $47,000.

How is it that most of these schools existed 50 years ago and charged right around $2,000, and over the past several decades their costs have hit the same level? While something smells fishy, there is a lot going on here.

First, from a simple economic standpoint, higher education prices have increased as compensation and other factors have increased much faster than inflation. Salaries and benefits (e.g. pensions) at many schools have far outpaced inflation.

Also, expectations for students and the cost of extracurricular programs have grown, exponentially. Take the example of Division I athletics. While a small number of schools (UCLA, USC, and Duke) make millions (billions?) from lucrative contracts, most athletic programs cost schools millions of dollars to operate.

Then, there are the costs of student dorms and dining halls. While students may still gripe about their campus living arrangements, these arrangements cost schools more and more every year. 50 years ago there were very few options for students, and the costs were comparatively modest.

Finally, and perhaps the biggest elephant in the room, are professor,. administrator, and staff costs. 50 years ago, nearly all professors carried significant teaching loads with very few exceptions. Administration was fairly lean and provided only basic services compared to today’s modern campus. Positions like Vice Provost, Director of Institutional Research, or Compliance Officer did not exist 50 years ago. Back then, schools only had a fraction of the senior level administrators they carry now.

Consider this one example, a mid-tier California university with 3,100 undergraduate students lists 10 administrative and staff positions in its undergraduate records office. Due to the complex nature of undergraduate records, compliance standards, and service expectations, it is safe to assume that this one office has twice the staffing it had decades earlier. With benefits and overhead, the increased costs likely exceed a million per year…just for this one office.

The fact that nearly all universities and colleges charge similar tuition fees is because nearly all of them follow the same pattern of supporting incredibly complex programs, systems, and services. Regardless of whether students access or support such programs (e.g. only a small number of students participate in athletics), the entire student body must pay for those services.

At Oak Valley College, the simplicity of the model means that we can save students thousands of dollars on tuition. No NCAA athletic program, fewer administrative requirements, and a simple academic modal mean that operational costs are less than half our competitors. Those savings are passed on directly to students, and tuition is exceptionally affordable.