college student debt

Has college tuition reached its breaking point?

As the father of a 5-year-old, I worry about the cost of college and I'm sure many parents of young children do. Prices at my alma mater, the University of Richmond, have risen close to 200% since I graduated in 1997. Has the quality of education also improved by that much? It's doubtful. While amongst friends, we laugh uncomfortably at the thought of million dollar tuitions, but one wonders if there has to be a breaking point where people just turn their backs on higher education. At what point is it unaffordable?

Since 1990, tuition grew at an average 6% a year, more than double the rate of inflation. The good news is that there are signs that this is slowing and hopefully for the long-term. Last year, tuition at college and graduate school rose 1.9% which was broadly in line with inflation and the slowest rate in decades.

college tuition inflation.png

The trend for overall tuition is in the right direction: down. However it really is a tale of two cities, or colleges. The top tier colleges are able to demand higher and higher sticker prices; while the rest of the colleges are hitting a wall and perhaps having to heavily discount theirs. According to the US News and World Report, the nation's top 50 private universities are bucking the overall trend and upping their tuition by an average of 3.6%. Lehigh University is breaking the $50k barrier with a 5% increase for the new year.

On the other end of the spectrum, private college are offering deeper tuition discounts than ever before. Tuition discount rates for freshmen hit a record 49.1% this year, according to preliminary results from a National Association of College and University Business Officers survey of 411 schools. At schools with fewer than 4,000 students, the freshmen discount rate was a whopping 50.9%! This makes college shopping feel kind of like stepping onto a used car lot - you better be ready to negotiate to get the best price and never pay the full retail price.

Demographics and politics

Demographics will likely lead to a continuation of lower price increases. The number of new high-school graduates grew 18% between 2000 and 2010 but only 2% in the first seven years of this decade. The number of high-school grads is projected to remain flat through 2023. Furthermore, white graduates, the most likely among races to attend college, are expected to decline over this period.

Another factor pressuring tuitions is that the government is looking to cut its own budget. In the proposed budget for 2018, the White House proposed a cut in financial aid for students. The largest cut proposed is to the Pell Grant program by $3.9 billion - this program is the largest federal grant program which means that would-be-recipients will need to find another way to subsidize their college expenses.

Setting Financial Goals

"Indentured Student - Cartoon" by DonkeyHotey is licensed under CC BY 2.0

Share This Story, Choose Your Platform!

About the Author: Chris Wang

Chris Wang


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Search Website

Annuity Review Database

Follow Our Podcast

Google Podcasts
Apple Podcasts

Recent Posts