Universities Need to Reconsider Tuition Increases
It’s time for universities to reevaluate their approach to tuition fees and consider cutting costs.
For years, the standard narrative around the soaring costs associated with universities has centered on the idea of a declining state investment in public higher education. Advocates typically argue that reductions in state funding have compelled public universities to raise tuition fees.
However, a recent study by Andrew Guillen from the Cato Institute challenges this perspective. His research, which spans 45 years of inflation-adjusted data from the State Association of Higher Education Executive Officers (SHEEO), demonstrates that state funding for public universities has not been declining as commonly believed. Instead, tuition increases are attributed to factors beyond state budgets.
Gillen’s research highlights an important reevaluation of how we think about higher education funding. It reveals that state funding per student has increased by around $56 per year over the last 45 years. Adjusted for inflation, funding has risen from $7,447 per student in 1980 to $11,683 by 2024—an increase of $4,236.
Moreover, total education revenues, which include both state budgets and tuition, have also surged to $19,000 per student in 2024, marking a significant increase from previous years. These statistics suggest that public universities’ claims of being under-resourced don’t hold up when considering the real financial support they receive.
So, why does this narrative of insufficient investment persist? Gillen identifies two main issues: selective data usage and flawed inflation adjustments.
Proponents of the “national investment” argument often focus on specific periods, like between 2001 and 2012, while ignoring the overall upward funding trend. Between 2012 and 2024, funding is predicted to rebound by $3,825. By utilizing comprehensive regression analyses over the span of 45 years, Gillen reveals a consistent growth pattern.
Furthermore, the SHEEO Report’s Higher Education Cost Adjustment (HECA) index tends to misrepresent inflation, leading to inflated historical funding comparisons. For instance, nominal funding from the 1980s, which stood at $2,355 per student, is portrayed as equivalent to $10,296 today when using HECA, rather than the more accurate $7,447 using other indices.
The study also disputes the notion that tuition hikes are a direct result of funding cuts. While tuition revenue has also risen—from $1,968 in 1980 to $7,510 in 2024—state funding has increased as well. If tuition were appropriately aligned with state funding, it would have actually decreased by $4,236 instead of rising to $5,542. This discrepancy indicates that other factors, such as administrative expansion and increasing amenities, are driving tuition rates higher.
Notably, there have been recent shifts in tuition revenue trends. Since 2019, earnings from tuition fees have started to decline, raising questions about how universities will react to demands for affordability.
These findings carry significant implications. Policymakers and university leaders should stop attributing rising tuition solely to budget cuts and instead examine spending priorities within institutions. Data indicates that out of 50 states, 25 have increased their budgets, with only five showing substantial reductions. Even those states cannot overlook a national trend indicating that universities are not experiencing a lack of funding compared to past decades. Focus should pivot toward cost efficiency and transparency in revenue allocation.
Some in the “national investment” camp may claim that temporary funding declines during recessions validate their narrative. Though Gillen acknowledges these dips, he counters that they are generally outweighed by gains during non-recession years, reflecting broader economic trends. Additionally, while some may argue that rising tuition reflects true educational costs, Gillen finds only weak correlations. The connection between state cuts and tuition increases is suggested to be only around $0.10 to $0.15 per increase.
Gillen’s rigorous research—grounded in comprehensive inflation-adjusted data—aims to debunk the investment myth and call for accountability in higher education. Universities need to provide a rationale for tuition hikes in light of the state support they receive and the increase in total revenue. Policymakers should pursue targeted reforms, focusing on cost containment and linking funding to measurable educational outcomes to ensure public universities serve students effectively.
