The big headline this morning is Ben Bernanke and his statement that additional monetary stimulus may be warranted because inflation is too low and unemployment is too high. The Consumer Prices report showed the cost of living in the U.S. rose less than forecasted, indicating that companies have been unable to raise prices. This also shows the Fed’s inflation goal is falling short yet again. In other economic news, both Retail Sales and manufacturing in the New York region came in higher than expected and bonds are now trading down.
I recently got an email from my university stating that college tuition costs would be going up for the 2012-2013 academic year. I was shocked! (Just kidding, we all knew it would happen!)
While I get one of these emails every summer, it was still mildly soul-crushing. I’m paying for college myself and don’t want to graduate buried in debt, so I don’t like hearing that my tuition bill is going to go up hundreds of dollars.
The email stated that “most resident undergraduate rates will rise by 2.8%.” As I read on, I couldn’t help but cringe as the email broke down exactly what the tuition increase meant for my wallet. In my case, as a full-time non-resident undergrad, I’ll likely see my college tuition costs increase by approximately “$670-$1,047 per term.” Awesome.
So why do these costs keep going up? After mining the Internet for answers, it seems pretty clear that there is no answer. The only explanation offered by my school was that they’d like to “advance the excellence of educational programs,” whatever that means. Does “advancing excellence” really require an extra thousand dollars per student?
While my own university couldn’t give me a “why” behind the rising college tuition costs, it didn’t seem like anyone else could either. Tuition is a hot topic on the World Wide Web, and there is a lot of debate surrounding college costs. I think it’s pretty safe to say that rising tuition rates are not just caused by one thing or another, but I have a few thoughts about exactly what is causing the inflation.
First, it seems that taxpayer support for public institutions is declining. How does this affect tuition? The less federal funding provided to the university, the more students and their families have to foot the bill to make up the difference in sticker price.
Second, colleges have to “sell” their services on the market. College degrees are in demand! But with so many options to choose from, how can colleges guarantee that they will get enough students to enroll?
Attracting new students can be a costly endeavor. So guess who picks up the check? Students! How do colleges boost enrollment? As an example, think about the college building boom. Colleges think that to attract new students, they need to offer fancy new athletic facilities, stunning dorms, and high-tech classrooms. All these things don’t exactly come at a low cost, and the upkeep is a never-ending bill; colleges have to cover pricey equipment, added staffing, maintenance, and utilities.
Also take into account that faculty salaries make up a large part of the budget, because professors are the lifeblood of an educational program. Colleges need to have the most competitive faculty and staff around. Since getting the best faculty means offering a competitive salary, colleges are sticking that cost to their students. College rankings mean a lot for attracting paying pupils, so colleges are doing everything they can to boost their rankings.
What does this mean for students? Katherine Dougan, a University of Michigan senior and microbiology major, is feeling the effects of rising college tuition costs. Even though she’s lucky enough to have parents that have saved up to pay for her undergraduate degree, she’s already feeling the pressures of paying for graduate school. “There’s not much funding for master’s degrees,” she said. In addition, she knows that she’ll have trouble finding need-based scholarships because “my parents make so much money.” While she’ll be lucky enough to escape the undergraduate program debt-free, she knows she’ll probably accrue some debt before she gets an advanced degree, which is necessary for her to achieve the career she’s shooting for. Like many students in her position, she’s trapped between a rock and hard place; she’s too “rich” to qualify for financial aid, but too “poor” to actually afford tuition.
The bottom line here is that there is no simple way to explain the rising cost of tuition. While you can’t do a lot to stop costs from going up, you can help yourself by being prepared. Start saving now, invest, and stay out of debt. I know it’s easier said than done, but preparing for the future is your only defense against tuition increases, so start saving today.