Why College Tuition Costs What It Does
Tuition is the set amount of money a student must pay in order to take classes at a college or university and gain some sort of credit for taking those classes. There are other costs associated with higher education, of course, including books and housing and lab fees. All of those costs must also be covered in order for a student to truly pay for school. But tuition can reasonably be considered the starting place for students, as they simply must pay these fees in order to attend any kind of class at all.
While it’s easy enough to understand what tuition is and why it’s important for students to plan for and pay their tuition bills, it can be slightly harder for students to understand how tuition rates are set, and why they might vary from year to year or school to school. The answers are individualized, of course, but these are a few notes that might make the process a bit less opaque.
At one point, college and university administrators could lean on a variety of sources for the funds they’d need in order to keep their facilities open. Administrators at public institutions, for example, might tap into taxes paid by residents in order to make ends meet, while the administrators of private schools might be able to rely on donations from alumni members when their bills came due.
Much of that has changed during the past decade or so. An expert quoted by the Wall Street Journal, for example, suggests that state funds for higher education declined from over $8,000 per student in 1987 to over $5,000 per student in 2012. Similarly, an article in The Washington Post suggests that the recession caused a dramatic drop in donations to public universities, and those figures have been slow to climb even as the economy improves.
If institutions can’t lean on other sources like taxes or gifts in order to cover costs, tuition is really the only means available to administrators. And these officials have a great deal of work they must support with the tuition dollars they raise from students.
Bills Covered by Tuition
The amount of money students pay in tuition covers several obvious bills administrators might be required to pay, including costs associated with:
- Teacher salaries
- Insurance for school employees
- Support staff salaries
- Building maintenance
But there are other costs that are absolutely vital to the health and vitality of a school that students might not see or experience. For example, many institutions consider their research to be an important part of the mission of everyone who holds a job at the institution. These schools might invest huge amounts of money into research, and that might be covered by tuition.
Similarly, schools might also be so successful that they outgrow the spaces they use for classrooms and arenas. Institutions like this might be required to buy more land, and pay taxes on that land, and that might also be a bill tuition helps to pay.
Since there are so many different costs administrators must cover, it might not be surprising to learn that most schools have entire committees devoted to setting tuition costs and spending those fees appropriately. The University of Texas at Austin, for example, has a Tuition Policy Advisory Committee made up of nine voting members and four advisory members, and together, they come up with a budget and a tuition recommendation on a yearly basis. It’s reasonable to suggest that other schools follow a procedure much like this in order to set their tuition rates.
While schools might go through a similar process to come up with a tuition rate, the fees they outline might be remarkably different, depending on the type of school in question. For example, according to the National Center for Education Statistics, these are the 2011-2012 tuition rates among different types of schools (in current dollars):
- Public, 2 year: $8,561
- Private, 2 year: $23,447
- Public, 4 year: $16,789
- Private, 4 year: $33,716
The main difference in the rates might come down to taxes, as public schools have a pool of money to dip into that private schools simply can’t touch. But competition might also play a role.
Private schools tend to be exclusive and difficult for students to enter. As a result, administrators can charge just a little more for basic entrance into these institutions, and it’s likely that students will pay those costs. If the degree comes with a bit of prestige, some students are more than willing to pay a little extra.
It’s possible, too, that students who do pay more for school get a good return on that investment. When they graduate, they may have a large field of alumni willing to hire them into internships and other starter jobs, and they may benefit from smaller class sizes while they’re in school, which might allow them to be even more prepared to enter the workforce and start contributing when they graduate. As an article from Forbes also suggests, prestigious schools also tend to attract the top talent, so students in classes in these schools might become accustomed to the idea of really fighting in order to rise to the top, and that could serve them well when they’re in the workforce.
But there are a number of students who do quite well in schools that are less expensive. They make the most of larger class sizes by splitting into study groups, and they challenge themselves to excel in their schoolwork, regardless of the level at which their classmates perform. Some students even petition to take graduate-level courses as an undergraduate, so they can be challenged in a state school without paying private school fees. Any or all of these steps could be smart choices for students who want the success without the big bills.
Discounts and More
It’s also important to remember that the tuition rate a school sets might not be the rate that an individual student is asked to pay. Institutions tend to provide students with a variety of discounts they can use in order to cover their costs, including grants, scholarships and work-study programs. These packages allow students to gain assistance with the cost of tuition, so they’ll be able to make their education fit within any budget restrictions their families might have.
These programs might sound small and quaint, but the results can be very real. For example, in 2012, the average discount rate for full-time students of private schools reached an all-time high of 45 percent, according to an analysis in Inside Higher Ed. This means that these institutions had a published tuition rate, but that students were asked to pay just about half of that rate, once all of their discount packages were put into play. That’s a remarkable savings.
Numbers like this demonstrate why it’s so very important for students to contact and work with the schools they’re considering before they write off these institutions due to their high published tuition costs. Discounts could make an expensive school look like a great value, while a school that once looked inexpensive might seem a little less of a bargain if no discounts are in play.
While we encourage all students to talk with financial aid officers of the schools they’re considering, we do have some tools that can help with back-of-the-envelope calculations. Our “Scholarship Center,” for example, can provide you with information about the different scholarships you can apply for in the schools you’re considering, and that could allow you to compare and contrast the aid you might get from a number of different schools. Feel free to experiment and play, and you just might find the schools that are right for you.