Why is college so expensive — and what you can do to afford your education costs (2024)

In the 2023-2024 school year, the average cost of attendance at an in-state, four-year public institution was $24,030, according to College Board data — an increase of $730 from the previous year. The costs were even more staggering at private colleges. When factoring in tuition, fees, room and board, the average annual cost of attending a four-year private school was $56,190, up $2,200 from the year before.

If you’re worried about how to afford the cost of your continuing education or experiencing sticker shock at your child’s tuition bill, you may wonder why college is so expensive. Rising inflation and decreased government funding are stretching university budgets, and many institutions pass increasing operational costs on to their students.

4 reasons for rising college tuition costs

1. Reduced funding from state governments

Many state legislatures slashed education funding in the aftermath of 2008’s Great Recession. According to a report by the National Education Association, 32 states spent less on higher education in 2020 than in 2008, with an average decrease of almost $1,500 per student.

Following 2008’s economic downturn, college enrollment spiked as dismal job prospects prompted many workers to further their education. With fewer state funds and growing demand for educational resources, students and their families were left to shoulder rising college costs.

Though state and local funding has risen in recent years, the increases haven’t been enough to offset the steep cuts made in most states.

2. Increased investment in student support services

Colleges and universities have become more than just places to earn a degree. These institutions now provide a broad array of student services, including on-campus healthcare, mental health services, career counseling and financial wellness coaching. Many also offer luxury amenities like fitness centers, movie theaters and even lazy rivers.

Between 2010 and 2018, spending on student services grew 29%, while instructional costs increased by just 17%, according to a report from the American Council of Trustees and Alumni. Administrative costs spiked by 19% during this period, as well.

Students typically must bear the burden of paying for these expenses. The financial impact was especially pronounced at private four-year institutions, where each extra $1 spent on student services translated to a $1.12 tuition increase.

3. Consistent demand for college degrees

Skills-based hiring is on the rise, with more employers willing to look beyond educational attainment and focus on whether employees have the talent and skills to succeed. Despite this promising trend, many employers still require college degrees. In fact, some experts say that at least two-thirds of all jobs require some post-secondary education.

Plus, a college degree can improve economic outcomes. A worker with a bachelor’s degree can expect to earn $2.3 million over their lifetime, compared to $1.3 million for someone with only a high school diploma, according to data from Georgetown University. Institutions can continue charging top prices because college is the ticket to so many high-paying jobs.

“Tuition, like healthcare, has low price elasticity of demand,” said Dr. Ernan Haruvy, a professor at McGill University in Montreal. “As price increases, demand drops very little. In other words, tuition goes up because it can, and will continue going up until there are substitutes that will increase price elasticity.”

4. Rising inflation and post-pandemic recovery

Amid surging US inflation, consumers pay a higher price for everything from milk and eggs to the cost of an education. Universities also feel the financial pinch, paying more for expenditures like technology, facility maintenance and electricity. To keep up with their employees’ higher cost of living, universities must also pay more to hire qualified faculty and staff members.

After undergraduate enrollment dropped by nearly 8.9% between 2019 and 2023,it’s finally on the rise, according to National Student Clearinghouse data. Still, the increase is moderate — public four-year institutions saw a 1.5% growth in undergraduate enrollment in Spring 2024, and private four-year universities’ enrollment grew by 1.9%.

In spite of this encouraging growth, numbers are still down overall. When coupled with a substantial drop in the birth rate after the Great Recession, many colleges (especially smaller institutions) expect to face recruiting challenges. Rising costs and unpredictable enrollment translate to a higher cost per student.

7 strategies for affording college

Planning is essential to making college more affordable. Building a college fund is much easier when your money has more time to compound. Parents planning for their child’s future education may opt for a 529 college savings plan, while short-horizon savers may choose a high-yield savings account to squirrel money away for college.

Planning becomes even more crucial if you’re getting a late start, according to Michael Hunsberger, a Missouri-based chartered financial consultant.

“Parents need to understand what they’ll be expected to pay and whether they will qualify for any need-based aid,” Hunsberger said. Planning ahead also means applying for need-based and merit-based aid as early as possible, as some funds are available on a first-come, first-served basis. Use a college savings calculator to begin planning.

1. Federal student aid

2. School choice

3. Scholarships

4. Grants

5. Work-study programs

6. Employer tuition assistance

7. Student loans

1. Federal student aid

The first step is to complete the FAFSA (or Free Application for Federal Student Aid), even if you don’t think you’ll qualify for federal aid. A 2018 report by the Brookings Institute found that as many as one in seven students enrolled in college were eligible for financial aid but never completed the FAFSA, which means they left money on the table. Plus, some scholarships require you to complete the FAFSA to qualify.

To maximize your chances of receiving aid, find out your state’s FAFSA deadline and apply as early as possible. The application opens each year on Oct. 1 — apply as close to that date as possible since aid is limited. You don’t need to know which school you’re attending to complete the FAFSA.

2. School choice

Your choice of school can have a profound impact on the total cost of attendance.

“Students and parents can address college affordability by applying to lower-cost colleges, such as an in-state public college and the six dozen colleges with ‘no loans’ financial aid policies,” said financial aid expert Mark Kantrowitz. He also recommended using the net price calculator schools offer to get personalized estimates of each institution’s cost.

The average in-state tuition for a public, four-year college was $11,260 in 2024, compared to $41,540 for a four-year private college, so choosing your school carefully can offer substantial savings. Starting at a community college can save you even more money — the average in-state tuition for a public two-year college was just $3,990.

3. Scholarships

Students receive scholarships for a wide variety of reasons, including academic achievement, athletic skill or military affiliation. The more scholarships you apply for, the better your chances of receiving financial assistance. You can find college scholarships by using scholarship search engines, through your college’s financial aid office or via the FAFSA.

You may also qualify for significant merit-based aid at some colleges.

“Many schools will award merit aid of 50% or more to students they really want to attend their school,” Hunsberger said. “Additionally, if a student gets into two similar schools that offer merit aid and one provides a significantly higher merit award, the student should appeal to see if a similar school will match it.”

4. Grants

Student grants can come from the federal government (like federal Pell Grants), your state government, your college and nonprofit organizations. Grants are often awarded based on financial need. Unlike student loans, most grants don’t need to be repaid.

Since federal grants will be awarded via the FAFSA and institutional grants arrive via your award letter, state grants might be the hardest to track down. Start by visiting your state’s higher education authority via the Department of Education.

5. Work-study programs

Federal work-study programs provide part-time jobs to students with demonstrated financial need. With most work-study jobs, you’ll work for your school, though you might also be able to work for a private nonprofit or a public agency. Work-study jobs pay at least the federal minimum wage, but you may be able to earn more depending on the type of work and required skills.

To qualify, you must be awarded work-study funds through your FAFSA aid package and enroll at a university that participates in the federal program. If you don’t qualify for a federal work-study program, you can also look into paid internships and jobs on or off campus. Talk to your school’s financial aid office about its employment resources.

6. Employer tuition assistance

If you plan to work while attending college, consider working for an employer that offers tuition reimbursem*nt. Employers can offer up to $5,250 a year in tuition assistance as a tax-free employee benefit.

7. Student loans

You can take out federal student loans, which are funded by the federal government, or private loans from various financial institutions. Federal student loans have several advantages over private student loans:

• Federal student loans have fixed interest rates that are usually lower than those you’ll pay with even the best private student loans.
• If you struggle with repayment down the road, federal loans also offer hardship options that private lenders typically don’t provide. For example, you can apply for an income-driven repayment plan (like the SAVE plan) to have your payment capped at a percentage of your discretionary income.
• Finally, federal loans are almost always a better choice than private loans because they also feature a wider array of relief options, including deferments and forbearances (to pause your repayment, as needed) or forgiveness programs (to cancel part or all of your remaining debt).

Related >> Types of student loans to consider

Is a college education worth the cost?

College grads have more job choices, including the opportunity to work in fields where degrees are typically required, such as education or healthcare. Higher education also substantially increases lifetime earnings for the typical worker. Other advantages include networking, exposure to new experiences and deepening your knowledge.

However, graduating with substantial student loan debt can be a decades-long burden, and not every student finds high-paying work after graduation. There’s also the opportunity cost of delaying the start of your working life while earning a degree if you attend school full-time.

Because there are substantial advantages and disadvantages, there’s no one right answer. In general, a college education may be worth it if you need a degree for your chosen career and can minimize future debt by pursuing scholarships, grants and lower-cost federal loans.

Additional reporting by Christy Bieber

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