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Can Universities Keep Charging an Arm and a Leg?

The cost of an education at a four-year college or university in the United States has consistently risen at a rate greater than the overall cost of living. In 2013, the total cost increases (including tuition, books, fees, and room and board) were at their lowest level for both public and private schools. Public school costs “only” rose 3.2 percent, while  private school costs “only” increased 3.7 percent. This cost percentage increase was the lowest that it has been since the 1980s; however, annual public school costs are $31,701, while private schools charge an average of $40,917. For most Americans these costs are still well above what they can afford to send their children to college. See: Sky Rocketing College Costs

University of Notre Dame, South Bend, IndianaColleges (residential colleges, as distinct from online school) are coming to realize that the rising cost of higher education has priced many moderate and low-income families out of considering college as a first option. Many of these families instead have chosen two-year community colleges, military service, online school or employment as alternatives to a four-year education. A hard look at the economics of college education and the current pricing model presents some interesting questions about the future survival of the traditional college model.

Impact of the Economic Recession on the Cost of College

During the recession, college endowment funds lost a quarter of their value in the 18-month period from June 2007 through January 2009. The recession has impacted college costs, which, along with student loan debt, are at the highest levels in history. Lower family incomes coupled with enrollment pressures placed on schools (there were 3.2 million graduating seniors in 2008, the greatest number in history) create uncertainty as to whether the higher costs will cause some students to delay the decision to pursue higher education.

Changes in Enrollment Numbers for U.S. Colleges and Universities

Surprisingly, enrollment numbers at four-year institutions have been trending up. Degree granting institutions have seen enrollment increases of 37 percent (15.3 million to 21 million). The change in enrollment numbers is typical of what happens when economic prospects are low. Unemployed and underemployed young people tend to turn to colleges and degree granting institutions for the prospect of becoming more employable when the economic picture improves. Notably, the rate of enrollment for Latino and African-American students rose (as a percentage of overall student populations on campus) to 13 percent and 14 percent, respectively, while non-Hispanic White student enrollment fell from 83 percent to 61 percent.

Is the Current Pricing Model for Higher Education Sustainable?

As the cost of higher education has continued to rise, so too has average debt for graduates. Students graduating from four-year institutions in 2012 had on average of $26,500 in debt. As more and more of the financial aid given to students and their families to pay for college has changed from a mix of grants and loans to almost completely private loans, student debt has grown at an alarming rate. At one point in 2013, a debate raged in Washington, D.C. over the interest rate on Federal student loans, set to double in July 2013. Passage of the Bipartisan Student Loan Certainty Act of 2013 held rates in check and tied future increases to the markets. This is only a temporary solution to the long-term question of rising college costs.

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Burt Halberstram is a freelance writer focusing on education, student loans, tuition costs, online schooling, university life and other similar topics.