OUR THOUGHTS ON:

College Tuition Costs...Declining?

Higher Education

By Blaine Helmick

It’s no surprise the massive amount of debt that college students have amassed over the last three decades can be attributed in part due to rising education costs. According to the Wall Street Journal, college tuition in the U.S. has risen nearly 400 percent in the last 30 years. But is that about to change?

The Wall Street Journal reports that tuition is now rising at its slowest rate in decades, increasing only 1.9 percent in the year through June 2017, an increase in line with the country’s rate of inflation. To put that in perspective, tuition has been growing at an average rate of 6 percent a year since 1990. After decades of astronomical rises, why would colleges and universities now start to slow rate increases?

One major factor is supply and demand. While there are ample choices for higher education the number of individuals attending schools is declining. According to the Department of Education, the number of two-year and four-year colleges has increased nearly 33 percent between 1990 and 2012. Enrollment, meanwhile, has not kept pace with the increase, and has in fact declined 4 percent since 2010. The thought of going to college and amassing a large amount of student debt is not, apparently, appealing to the average high school graduate.

According to the Federal Reserve, Americans now carry more than $1.4 trillion in student loan debt, or on average about $38,000 per student.  With the recent stronger job market, fewer students are finding the need to go to a college or university when they can start earning money right out of high school. Not only that, but according to the Western Interstate Commission for Higher Education, the number of high school graduates is expected to remain stagnant through 2023, further limiting the freshmen enrollment pool.

While those factors may continue to cause downward trends for some institutions, colleges and universities try different ideas to help increase enrollment like offering grants and/or discounts, but the idea of freezing or decreasing tuition prices may be the best yet. Slowing the rate of increase, or even reducing the amount of tuition cost per year, could serve as a strong incentive for students who want to enroll in college or university, but do not want the financial burden that comes with it. Increasingly, it will be more important for an institution to focus on factors that differentiate it from its competition, like depth and breadth of program offerings, the campus experience and other aspects of the “college” experience.

As price sensitivity weighs more on the mind of potential consumers, colleges and universities will need to ensure they demonstrate the value of their institution’s degree and other intangibles students will attain by attending that school. Will the trend stick around? Only time will tell.

For more articles on the Higher Education industry, please visit the Our Thoughts On...blog.  

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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