If you are researching colleges and are surprised by the cost, you’re not alone. Over the past 20 years, the cost of higher education has grown more quickly than the cost of almost every other sector of the economy.
Even public universities — which historically have been a much lower-cost option than private schools — can cost well into the five-figures, making it difficult to earn a degree without taking on a substantial amount of student loan debt.
Why is college so expensive right now? Continue reading to learn what’s driving these prices and what you can do to manage the cost.
Why Is College So Expensive in America?
Many financial experts and analysts have tried to identify the main cause of the price increases of higher education. But so far, they haven’t been able to find just one cause. Instead, there are several factors causing prices to rise:
1. Recruitment Costs
There are thousands of colleges and universities across the country. As more schools work to recruit students, colleges are spending more and more money to advertise to potential students. From hiring full marketing teams to paying for social media advertisements, recruitment costs can be staggering. In fact, the Hechinger Report said that colleges collectively spent $2.2 billion on advertising in 2019 — and that number is growing every year.
2. Administrative Salaries
Higher education is big business. Senior-level executives and staff members can command large salaries. And as colleges compete for skilled executives, those salaries continue to increase too. HigherEdJobs found that the average salary for a CEO of a single institution or campus is $330,000, while academic deans typically make $200,000 or more.
3. Non-Resident Tuition
Schools have begun to aggressively recruit out-of-state students. Between 2001-2002 and 2016-2017, non-resident freshman enrollment at the nation’s 63 public research universities increased from 19% to 26%.
Why are nonresident students appealing to colleges? They pay significantly more than residents. According to The College Board, out-of-state students pay more than double the resident tuition rate.
4. Declining Federal Aid
The federal government has decreased the amount it gives in financial aid. The government discontinued Perkins Loans — which issued low-interest loans to students with exceptional financial need — in 2017. Since 2010-2011, the amount of federal grant aid, such as Pell Grants, has steadily decreased.
With less federal aid available, schools often have to make up the difference with their own institutional grants, scholarships, and loans.
Is College Worth It?
While the cost of college continues to rise, in most cases, the long-term benefits of having a degree outweigh the drawbacks. According to the Bureau of Labor Statistics, the median weekly earnings for a bachelor’s degree holder are $524 higher than those of an individual with only a high school diploma. In one year, that amounts to more than $27,000.
So does college cost too much? The answer is, it depends on the career you’re interested in, as well as the cost of the program you’re planning to pursue. In the long run, though, college can increase your earning potential and open the door to numerous job opportunities.
If you decide the cost of college is worth it, here are a few ways you can offset expenses and avoid taking on more loans than necessary.
What You Can Do to Reduce Your Expenses
Now that you know why college is expensive, you can focus on developing a plan for managing your costs and reducing your expenses so you can earn a degree without a significant amount of debt:
1. Apply for Gift Aid
You may not realize how much gift aid is available. Unlike loans, gift aid doesn’t have to be repaid — making it a great way to cover some of your costs. You can search for scholarships and grants with tools like FastWeb and Unigo.
2. Use the 2+2 Strategy
If you want to dramatically cut down your college costs, consider enrolling in a community college for two years. You can fill the general requirements and prerequisites for your program, then transfer to a four-year school to complete your bachelor’s degree. Your degree will be exactly the same as if you went there the entire time, but community colleges cost a fraction of what four-year universities cost.
3. Opt for a Cheaper School
While you may have a dream school in mind, think about attending another college if the cost is too high. A less prestigious school may offer more financial aid, and state schools generously cost less than private schools.
4. Work While in College
If possible, work part-time while you’re in school and during the summers or holiday breaks. By using a portion of your earnings for your college expenses, you can reduce the need for student loans and graduate with less debt.
5. Refinance Student Loans
If you do need to take out student loans, make sure you understand how they work and how to repay them more quickly. If you have high-interest student loan debt, refinancing your loans can be a smart decision.
By refinancing your student loans, you may qualify for a lower interest rate than you have now. With a lower rate, less interest will accrue over the life of your loan, potentially saving you thousands of dollars. In fact, ELFI customers reported that they save an average of $214 per month or an average of $18,688 in total savings by refinancing their loans.**
You can use ELFI’s student loan refinancing calculator to see how much you could save by refinancing your loans.*
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