Yet college has never been more costly. Tuition has risen 107 percent since 1980—more than twice the rate of inflation in the last decade—and is the fastest growing source of revenue for public colleges and universities, according to a report released in May by the National Center for Public Policy and Higher Education.
So why does college cost so much? The answer is a mixture of factors, driven by the need to compete for the best students while maintaining the highest academic quality the college can afford. It’s influenced by the economy, student aid and state appropriations. And for private schools, by the level of donations. A study released this year by the National Association of College and University Business Offices shows that colleges spend a majority of their budgets on instruction and student services. Salaries and benefits, plus student-related costs like counseling and cafeterias, make up about 70 percent of private school expenses.
These costs rise at a steady rate. But other costs are rising much faster, reports the National Commission on the Cost of Higher Education. Technology needs—laptops and upgraded classrooms—are a primary factor. So are new construction projects to accommodate rising enrollments, complying with federal regulations, and meeting the expectations of students, who want well-equipped gymnasiums and fully wired dormitories.
There are also more part-time and older students, the report says, and more students needing remedial help—all of which cost money. The price of all this is actually greater than the price of tuition, says Richard Hirté, the University’s vice president for financial administration.
At Xavier, where tuition contributes more than 60 percent of all revenue, it costs $19,775 a year to educate a student. But net tuition—tuition minus all financial aid received—is just $13,500. With the University returning about 25 percent of its tuition dollars in financial aid, and spending about 75 percent of its $103 million operating budget on instruction and student services this year, it’s a financial tightrope.
Meanwhile, the prices of other big-ticket items—technology, health care, facilities—keep going up, Hirté says. To pay for them on top of steadily rising faculty salaries and benefits, there’s only one alternative if financial disaster is to be avoided: The price of admission must increase. Setting tuition each year is a precarious walk between an institution’s financial needs and families’ ability to pay. How much to charge depends on a college’s other sources of income, such as endowment revenue and contributions from alumni and friends. It also explains the wide range of tuition that schools charge, which float from $7,000 at four-year public universities, to more than $40,000 at private schools.
“There’s a price-quality relationship in the higher education marketplace, and a high correlation between students with high SAT scores and family income,” Hirté says. “We’re walking on a balance beam here. We also want to keep Xavier accessible.”
Tuition hikes at some of Ohio’s state-supported schools this year climbed into double digits, triggering threats of tuition caps. Xavier raised its tuition by 7.5 percent to $17,780 for this fall, the largest increase in 10 years. The price hike is primarily to hire 33 more full-time faculty, Hirté says.
Hirté’s dream, and the University’s great challenge, is to quadruple the school’s endowment, the fund in which the University draws annual income off interest payments, to about $400 million. That could bring in more than $15 million a year in unrestricted income.
“Unfortunately, college presidents have to operate in the real world, balancing tuition against operating costs, while remaining sensitive to the challenges families face in sending their children to college,” says David Warren, president of the National Association of Independent Colleges and Universities. Still, he says, “A private college education is one of the best investments a student will ever make.”