modern technology infrastructure, managing an uncertain economic climate, and navigating resource constraints.10
Aside from the general decline in the student pool and other competitive market pressures,
several factors have been identified as contributing to the overall financial instability of colleges and universities. Consider for example, just the following: rising cost of education, reliance on tuition, administrative bloat, heavy deferred maintenance expenses, online learning offerings, and tenure.
Costs of Education
Even with substantial financial aid offerings,
many families believe the costs of education are too burdensome. A recent study conducted by the edtech provider Cengage found 68 percent of students say education costs are “a struggle for them or their family members, with tuition being cited as the biggest issue.”11
And tuition increases are a concern. U.S. News & World Report looked at tuition changes over the last 20 years at the 440 national universities included in the 2022-23 best colleges ranking. It found, on average, that:
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Looking at numbers for 2021 alone, the College Board found average tuition, fees, and room and board for the 2020-21 academic year increased by 1 percent to $22,180 for in-state students at four-year public colleges with the same expenses rising by nearly 2 percent to
$50,770 at four-year private institutions.13
Increases in tuition mask what is an even larger issue: the discounting of tuition. The National
Association of College and University Business Officers defines the tuition discount rate as the total institutional grant aid awarded to undergraduates by colleges and universities as “a percentage of the gross tuition and fee revenue the institution would collect if all
students paid the full tuition and fee sticker price.” And a new study by that same group found that “the average institutional tuition discount rate was 56.2 percent for first-time, full-time freshmen for the 2022–23 academic year, and 50.9 percent for all undergraduates” – a record high since the study started in 1994.14 (A 35 percent discount rate places colleges in a danger zone, within which many would thus be categorized.)15
Offering a snapshot of what students pay provides insight into the financial environment into which students enter – namely, colleges are engaged in ‘extreme competition’ for students, which they are addressing by ‘forgoing tuition revenue to provide greater access to students.’ As a result, more and more colleges – particularly those without large endowments – are trying to make themselves affordable to students by offering a host of scholarships and other aid packages. Consider, for example, that 82.9 percent of all
The threat of closure is real. And the consequences extend not just to specific institutions being affected, but to the students who are in attendance.
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