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Financial Aid

Top College Cost Drivers

Jennifer Leclaire

June 05, 2007

The United States is home to the world’s most expensive higher education system. So says the College Board, an educational testing and services group.

That probably doesn’t surprise you, especially if you are among those paying or preparing to pay the average of $5,800 a year in tuition to attend a four-year public university. (That figure skyrockets to an average of $22,200 a year for the privilege of attending a private one!)

You may be surprised to discover what’s driving college costs through the roof, though. Financial aid, grants, scholarships, student loans – and good ‘ole mom and dad – might ante up the majority your college education. But that doesn’t mean that price is not an issue, right?

Knowing what drives up costs could help you select a university that is less likely to raise tuition by double-digit percentage points each year. You’ll appreciate that when your friends who didn’t care are still paying off their student loans at the age of 40. What’s driving up costs?

The Amenities War

“Colleges have engaged in an amenities war, attempting to attract only the best students by building wave pools, rock climbing walls, whirlpools, and movie theaters on campus,” says David Harpool, J.D., Ph.D, provost and chief administrative officer of Ellis College of NYIT, an online degree college in New York.

Indeed, some colleges are home to fast food chains and fitness centers, yoga classes, bundled cable TV and Internet service in dorms — and dorms that look more like luxury town homes than drab dwellings. Harpool also cites swelling athletic budgets and presidential perks as culprits. That’s all cut out of the picture with online campuses.

Economic 101

There is also pure economics 101, that is, the issue of supply and demand, according to Brian Greenberg, CPA, CCPS, principal of Marlton, New Jersey-based Brian C. Greenberg & Associates and host of the TV show on college planning called “College Bound.”

“More kids are applying for the same number of top spots, but the number of schools hasn’t doubled to match the population growth over the last 30 years,” Greenberg says. “You also have international students coming to the U.S. for a college education. The demand is greater than the supply.”

Arbitrary tuition hikes

Perceptions of reality are also contributing to rising college costs. Dr. Paul Wrubel, co-founder of The College Company, a financial aid consultancy for college students and their families, cited a study in the Chronicle of Higher Education that demonstrated the phenomenon.

“If a school raises its prices arbitrarily, its number of applicants have been known to spike,” Wrubel says. “There is the psychology that says, ‘If it’s expensive it must be good.’ Colleges also tend to raise prices in lock step with one another. When one raises tuition, others feel they have the permission to do the same.”

Shame on you

What may be worse, Harpool says, is that students and their parents encourage the behavior by paying $30,000 for an undergraduate year of college when lower cost options are available. And, of course, the federal government has steadily reduced its support for operating budgets since the 1970s.

Reecy Aresty, a financial advisor and author of “How To Pay For College Without Going Broke,” says constant changes in technology and the need to accommodate an ever-increasing qualified applicant pool are also among the college cost drivers. The bottom line, she adds, is that the market will bear it. It goes back to supply and demand. That, experts agree, is the number one driver of escalating college costs.

“Tuition costs are rising because families and students have the ability to borrow whatever the colleges charge — paying is the easy part,” Aresty says. “What everyone must realize is that all the financial aid in the world is useless without that coveted admission ticket!”

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