Update: A Closer Look at the Cost of Education

This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at Advisor Perspectives/VettaFi.

Note: We've updated this report with the latest data from the College Board.

Many reports on the cost of education and affordability over the last decade have focused on the rapid growth of educational debt. Here we examine student aid, costs of undergraduate education, and enrollment over time. We've used data from the College Board's annual Trends in Higher Education publications. The Federal Reserve Bank of New York regularly tracks household debt and credit. In their most recent update, they calculate student loan debt to be nearing $1.3 trillion. Incidentally, the number of defaulted student loans hit a new high in 2016, according to a recent Time article.

Enrollment data includes all students enrolled in degree-granting, full-time-equivalent two-year and four-year programs. Full-time-equivalent (FTE) students are "enrollment numbers are based on a federal formula that counts each part-time student as equivalent to one-third of a full-time student." All aid data includes loans and aid from all sources, including Federal and private grants, scholarships, and loans.

All data is adjusted for inflation using today's dollars. Figures are for undergraduate education unless stated otherwise.

Some argue that rising student enrollment over the decades has led to the higher costs of education, but the two charts below suggest otherwise. The number of students enrolled today is about 50% more than what it was in 1990, while the cost of tuition has more than doubled. The rise in student financial aid was much more rapid than enrollment and the aid per student has risen tremendously. Cost figures are for tuition only and for one year.

If we were to include all students in this calculation (plus graduate), enrollment has doubled and student aid has gone up a staggering 840% since 1971. [Data for undergraduate student aid and enrollment is available from 1990 forward].

The next chart shows the actual enrollment and aid figures since 1990 for undergraduate students.

The reasons for the shocking increase in student aid are many, in addition to the stark rise in tuition: increases in the cost of living, a decrease in average wages and thus the ability to pay for education, among others. Let’s take a look at the rise in tuition over the same time frame, adjusted for inflation. Remember, these cost figures are for tuition only and do not include fees and room and board, which add even more to the cost of education.

With the huge rise in tuition comes a simultaneous rise in aid per student. Note that aid includes loans, but is not the amount of debt that students owe as a result. What is clear is that students need much more help to pay for their education than in the past. The chart below shows aid per student per academic year.

Here is one last chart on the cost of tuition for a four-year degree (average of public and private), which has jumped 223% since 1971. What's surprising here is the larger rise in cost for a public institution versus a private non-profit since 1971. The rapid rise in public tuition starts just after the turn of the millennium - which proves that state funding cuts as a result of the Great Recession were not the cause of the huge rise in tuition.

If we take a look at the inflation over time, we see a few jumps, only to come back down to its present day ten-year moving average of 1.8%. This proves that tuition price increases cannot be blamed on inflation – a closer look at CPI components since 2000 shows the dramatic tuition inflation (which is overly dramatic, as the BLS calculates tuition based on sticker price, not on what households actually pay).

Many have postulated the reasons behind today’s inflated tuition prices: state funding cuts, the increasing cost of quality faculty, the need for the newest and best facilities to meet demand, increasing cost of cutting-edge research. It's hard to pinpoint the precise causes, but regardless of the reasons, it is clear that students are taking most of the burden and struggling to pay for their education as a result.

Read more updates by Jen Nash