The Surprising Truth About the Rising Costs of College

The cost of college is rising, but two critical pieces of information recently reveal even more stunning information.

May 11, 2014 at 12:50PM

Mit By Opencontent
Source: opencontent 

The rising cost of college grabs endless headline attention. Yet too many are missing the reality that these costs don't really outweigh the rising benefits.

Countless questions
According to College Board, tuition at four year public schools has risen by almost 4.5% each year since 1991, growing from about $3,400 to $9,000 today. While the growth at private schools was slower on a percentage basis, the increased cost is even more eye-opening, as tuition has risen from $16,750 to $30,000.

And these figures all are in constant 2013 dollars, meaning you can't blame inflation.

This rising costs have caused many to question whether or not college itself is worth it. The Wall Street Journal reported in 2012:

College officials say the long-held faith among many Americans that college is worth whatever it costs is starting to waver under the weight of lackluster job prospects, stagnant wages and a pileup of student debt. 

Even more recently, website FiveThirtyEight notes "as the U.S. economy improves, more high school graduates are choosing work over college." The government revealed less than 66% of the high school class of 2013 had enrolled in college, the lowest level since 2006:

Images

All of this is to say college is seemingly becoming less and less appealing to countless Americans.

But unfortunately, two important things are missed in this conclusion.

The actual truth
First, it's critical to see that, although the topline tuition number is rapidly rising, the actual cost of college hasn't risen nearly as much. College Board reports that net tuition, which factors in financial aid, has risen 66% at public schools since 1991 -- just 2.2% a year. This is a far cry from the 160% growth seen in the published numbers.

The difference is even more striking at private schools, as the true cost is up by only 11% over two decades, from $11,270 in 1991 to $12,460 in 2014.

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Source: College Board

In 1991 a student could expect to pay more than half of the published tuition at public schools. Today, that stands at just 35%. While many talk about the rising costs, few mention the rising benefits of financial aid, which has helped reduce the impact of the increased prices.

Secondly, Pew Research Center found in its study "The Rising Cost of Not Going to College" that the gap between what someone earns with a college degree versus someone without one has only widened over the years 

Pew Research Center

This salary gap between a high school diploma and a college diploma used to stand at just 24%, but it now sits at more than 60%.

Yet it doesn't just stop there. The Federal Reserve also recently found the expected earnings from a college degree has risen in recent years. For those who graduated college in the 1990's and 2000's, they could expect to make $5,400 more in their first year  than high school graduates. In 10 years, that ballooned to nearly $27,000.

Even with the rising costs, the Federal Reserve suggested "the benefits of college in terms of higher earnings far outweigh the costs of a degree," and "the average college graduate earns over $800,000 more than the average high school graduate by retirement age."

It's true the costs of college are rising, but it is vital to see the benefits are as well.

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