What Goes Up…Must Go Up? Rising College Costs Break the Laws of Physics

Blog Post
May 25, 2011

We know it is happening: the cost of college is going up. A few years ago the NY Times published an article based on a report by the National Center for Public Policy and Higher Education reminding us that college may soon become unaffordable for most in the U.S. This reminder was accompanied by the facts that there was a 439% increase in college tuition between 1982 and 2007 and a 147% increase in median household income during that same time period.

“Surely,” we think to ourselves, “the cost of college cannot continue at this rate. Don’t we believe in things like the laws of physics, which tell us that what goes up, must come down?” Unfortunately, the laws of physics are not applicable here. Inflation is likely to continue, meaning that the cost of college may continue to rise.

According to data from the U.S. Bureau of Labor Statistics, the average annual inflation rate between 1988 and 2009 for college tuition based on the Consumer Price Index (CPI) was 6.6%. If college tuition continues to increase annually by the same percentage, we will see an exponential rise tuition rates (Please see Table 1 [attached under Related Files]). For public 4-year in-state colleges and universities, the tuition rate of $15,213 for the 2009-2010 academic year will increase to $54,621 during the 2029-2030 academic year. Private 4-year colleges and universities will remain the most costly, with the tuition rate increasing from $35,636 to $127,950. Public 2-year colleges and universities, including community colleges, will remain the most affordable, with the tuition rate increasing from $2,544 to $12,472. (Please see Table 2 [attached under Related Files] for a comparison of 2009-2010 and 2029-2030 academic year tuition rates). 

These sticker prices may surprise even those endowed with the financial resources necessary to afford such tuition rates. However, they most certainly send the message to young people from low and moderate income households that college is unaffordable. Previous research tells us that high college costs may keep many young people from low and moderate income households from attending and graduation from college. Moreover, loan burdens have increased in recent years, causing some young people to question whether college–especially considering the income they will earn upon graduation relative to their debt–is a good return on their investment.

So how can we help young people keep pace with these rising costs and ensure that those from low and moderate income households will still have access? Below are just a few options (some currently in existence and others that have been proposed) that focus on helping young people and their families take a proactive approach to rising tuition costs: saving.

Children’s Development Accounts (CDAs) & the ASPIRE Act

Children’s Development Accounts (CDAs) are savings accounts in young people’s own names that are both progressive and universal, meaning that all young people would be eligible and those from low and moderate income households would receive additional contributions. Moreover, CDAs may give young people agency in and perceived ownership over the saving process with the potential to significantly improve their educational outcomes. The ASPIRE Act has been proposed to the U.S. Congress in order to make CDAs a reality and help young people save for college costs. 

529 College Savings Plans

These state-run plans with federal oversight allow families to save for young people’s college education in tax-free accounts.

Tax Credits

Tax refunds through credits like the American Opportunity Tax Credit and the Saver’s Credit may be targeted for saving, especially among low and moderate income households. $aveNYC, for example, is a research initiative aimed at helping low and moderate income tax filers save their tax refunds.

None of these options in and of themselves will be the silver bullet for either helping young people gain access to college or for forcing college tuition to follow the laws of physics. All options require additional research and evaluation. However, these approaches show promise and are worthy of the attention of researchers and policy makers alike.

Note. College tuition rates for the 2009-2010 academic year are based on reports by the College Board. In addition, there is no guarantee that the annual inflation rate between 1988 and 2009 of 6.6% for college tuition will reflect actual inflation in years to come. This information is meant as a way to give an indication of what college tuition could be given past inflation.