College tuition growth slows down

Tuition prices are rising at a slower pace than they have in decades, reports Josh Mitchell for the Wall Street Journal.

For its analysis, the Wall Street Journal reviewed figures from the Department of Labor on tuition at American colleges and universities. It compared increases in these figures to the country's rate of inflation.  

Analysts found that tuition rose by only 1.9% this year through June. Comparatively, tuition grew at an average rate of 6% per year between 1990 and 2016, Mitchell writes, which was more than double the rate of inflation.

States with the highest—and lowest—average tuition

What's responsible for the slower growth?

One driver of the trend is that colleges are sensitive to the financial pressures on their students, according to Kathy Dawley, a financial aid expert and principal at Hardwick Day, a division of EAB. "Since the recession of 2008 and in response to extensive focus on the rising cost of college and associated access and affordability issues, higher education institutions have been very cautious about the extent to which they increase annual costs, even as they maintain or even expand levels of financial aid and scholarship funds available to students," she says.

Dawley adds that many schools have faced trade-offs to make this possible. "For some, especially on the private side, this work to contain rising costs has come at the expense of funding new initiatives such as new academic programs and/or new facilities."

In his coverage for the Wall Street Journal, Mitchell also proposes a few potential explanations. The first is the simple law of supply and demand. While the number of two- and four-year colleges has increased by 33% during the last 20 years, college enrollment is down by more than 4%.

College enrollment has also been down because of the reduced pool of college-age Americans due to lower birthrates, and because of a strong job market—traditionally a time during which fewer Americans return to school for additional training. The number of high school graduates is expected to remain steady until at least 2023, according to the Western Interstate Commission for Higher Education, which means a steady, if not smaller, pool of traditional candidates from which colleges can recruit.

Enrollment challenges ahead for colleges, report predicts

Another possible reason, according to Mitchell, is that Congress has not increased the maximum amount that undergraduates can borrow for college since 2008. Some (but not all) have contended that institutions raise tuition when caps on student borrowing are raised, he writes. If this is true, the fact that the cap has not been increased in nearly ten years may also be a reason tuition rate growth has slowed down.

Finally, Mitchell suggests that tuition increases may be slowing down because some public four-year universities have started to see state funding rebound as the economy recovers from the recession and states enjoy rising tax revenues. Mitchell argues that, as a result, public four-year institutions have not felt the need to increase tuition as much as they have in previous years (Mitchell, Wall Street Journal, 7/23).

How are ROI concerns impacting students' enrollment decisions?

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