College Tuition Grows at Slowest Pace in Decades
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This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm Charlie Turner in New York. Amid complaints about how expensive it is to attend college, in fact, college tuition is growing at the slowest pace in decades. It follows a rise of nearly 400 percent over the past three decades that helped fuel a surge in student debt. According to the College Board, Tuition at college and graduate school, after scholarships and grants are factored in, rose 1.9 percent in June. That's within the growth of overall inflation. Some schools are offering discounts and cutting their prices. Let's find out why this is happening with Wall Street Journal reporter Josh Mitchell, who joins us from Washington.
Josh, I imagine tuition growth is slowing because so is enrollment.
Yeah, so this is a question of supply and demand.
Why is college tuition now growing at the slowest pace in decades?
And we've seen lower demand for college and higher education in general as the labor market has improved. This is what happens when the economy is doing pretty well. People decide to go out in the labor force and get jobs and hold jobs as opposed to going back to school or going to graduate school. So when the economy is good, people are less inclined to go to school. When the economy is bad, that's a good opportunity to go back to school if there's not many jobs out there. And that's what we saw during the recession. There was this big boom in college enrollment and higher education enrollment in general. And now that enrollment has come down about more than 4% in terms of how many undergraduates are in school.
That's come down about 4% or so since 2010. So you have fewer people out there going to school, which means fewer applicants coming into colleges. This is also partly a demographic issue. There are lower birth rates. So that means that the pool of high school graduates is not growing at nearly the pace that it had been. Just to throw some numbers out there, new high school graduates grew 18% between 2000 and 2010, but that number is only 2% in terms of growth. how many new high school graduates we're seeing in the past year compared to 2010. So this decade, the pool of high school graduates is growing at a much slower pace, which means the colleges themselves just are increasingly competing for what you could call a stagnant pool of potential students.
And there's the loan factor. You write that Congress last increased the maximum amount undergraduates could borrow from the government in 2008. That's almost a decade ago.
Right. So if students are already borrowing close to the maximum or at the maximum in their undergraduate loans, that constrains how much colleges can charge. Many students, perhaps most students, don't have access to private lenders if they don't have someone with a good credit score that they can co-sign. on that loan with. So for many students, your only option is borrowing from the federal government. And if those loan limits haven't increased in a while, then basically colleges themselves are constrained with how much they can charge.
And also, there is the matter of competition.
Right. So I think that is the supply side of the equation, is that between the 90s through about 2010 or so, we saw this big increase in just the number of schools there are in the United States. And not only that, but with the rise of online classes, you have students who have more options now. And so that's injected some competition in certain corners of higher education. And so we might have an oversupply problem. We have lower demand, and then we have, in some cases, oversupply.
How has enrollment decline contributed to slower tuition growth?
And I think what you're seeing is some type of market correction going on right now, where those two forces are pushing down price growth. I must emphasize prices are still growing. They're just not growing at the same pace that they were. And we're also starting to see some schools close. So, you know, I think over the next few years, we're going to see, you know, sort of, I don't know if you could call it a popping of the bubble, but you're going to see some slower price increases than we have seen.
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