Here’s Why Some Tuition Costs Are Falling

We’re constantly told that college costs are on the rise, but weirdly enough that’s not entirely true. While education expenses are rising, some education and training options actually cost less than just a few years ago.

To understand how this is possible, let’s begin with the reality that not all educational options have the same cost basis. In general terms, private schools are substantially more expensive than public institutions, there’s a significant financial penalty for studying out-of-state, and two-year, public, in-district schools are often a great way to get college training.

But – interestingly – some costs are declining. They’re down even when corrected for inflation.

These are what the numbers look like, according to the government’s National Center for Education Statistics.

Why is it that public and private nonprofit institutions are seeing rising costs, while private for-profit schools have seen cost declines?

There’s no shortage of applicants for private schools. Jeffrey Selingo, in a 2022 article for The Atlantic magazine, noted that “Over the past two decades, the number of applications submitted to colleges has increased more than 150 percent, even as the size of high-school graduating classes has remained fairly stable.”

In other words, college applicants – especially for the most elite private schools – are competing in a seller’s market. There’s little reason to lower tuition and other costs when there’s a surplus of student households that will gleefully pay the bill. 

For-profit Schools Lowering Costs

The story is different among for-profit schools. Their tuition costs are down. Why is that?

Online instruction graduation rates are lower than those who receive in-person instruction. 

“Overall,” said Forbes late last year, “the results showed that students enrolled exclusively online were 8.3 percentage points less likely to complete bachelor’s degrees compared to students who either attended classes in person or who enrolled in a mix of online and in-person classes.” 

Those who don’t graduate are still obligated to repay college loans, but without a degree or certification have less ability to increase wages.

This is not something new. A 2012 Senate report explained that, “As a result of high tuition, students must take on significant student loan debt to attend school. When students withdraw, as hundreds of thousands do each year, they are left with high monthly payments but without a commensurate increase in earning power from new training and skills.”

The Gainful Employment Rule

Many for-profit schools, it should be said, provide valued training. But not all.

“We are fixing a broken system and making sure that students know, before they take out loans, when college programs have a history of leaving graduates with high debts, low earnings, and poor career prospects,” said Education Secretary Miguel Cardona. 

And what is the fix? The government has established a “Gainful Employment” (GE) program to measure just how well for-profit schools are doing. 

Here’s how it works.

First, the GE rule establishes a debt-to-income ratio to protect students from borrowing too much given their annual earnings. One way for-profit schools can get under this new standard is to charge less.

Second, “At least half of graduates,” according to the Education Department, must “have higher earnings than a typical high school graduate in their state’s labor force who never enrolled in post-secondary education. This ‘earnings premium’ assesses whether the program enhances its students’ earnings potential.”

Third, the plan has teeth. For-profit schools that do not advance student careers can have their student loan funding cut off for non-performance.

The new standards mean individuals are more likely to get value for their student loan dollars in the form of higher incomes and better career prospects, the core reasons many students attend for-profit schools in the first place.