College tuition is on the rise across the U.S., and University of California President Janet Napolitano says she knows why.

In a report last year, the College Board showed the price of a four-year degree rose faster than the rate of inflation, with private tuition climbing by 3.7 percent to an average of $31,231. At public universities, the picture was scarcely better: Costs jumped by 2.9 percent during the academic year to $9,139.

However, in an interview with CNBC's "On the Money," Napolitano says UC students should blame state budget cuts—and not the universities themselves—for higher tuition bills.

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"The chief cause of the cost to students going up is the fact that public investments in our universities have gone down. There are two major sources of revenue to operate quality institutions: state appropriations and tuition," Napolitano said.

"And when state budgets go down … unfortunately tuition has had to go up," she added. (Tweet this)

Napolitano says she hopes the money will be coming back to education—in her state, at least. "As state budgets are restored, as monies come back into the coffers, we're advocating it's time to reinvest in the University of California and the Cal State University system."

The former U.S. Homeland Security secretary and former Arizona governor oversees the University of California system and its nearly $27 billion dollar annual budget. Napolitano now heads the entire UC system, which includes crown jewels UCLA and California-Berkeley—widely considered to be among the best state funded institutions of higher education—and 10 other universities.

The UC system also has five medical centers and three national research laboratories.

Although it's a public school, the cost of a UC degree doesn't come cheap. The 2015-16 cost of tuition and fees at a University of California school is $14,000 for an in-state student, more than doubling to $38,000 for out-of state residents.

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Napolitano says nearly 90 percent of the 235,000 undergraduates in the UC system are from California.

Napolitano tells CNBC that the states "robust financial aid system" provide college funding for a majority of in-state students. "Fifty-five percent of our undergrads, in fact, pay no tuition because they come from families that make less than $80,000 a year."

She says California is such a great "economic engine for the country" and that the state's "innovation and entrepreneurship ... all pivot off the higher education system that we have."

Napolitano, who served in the Obama Administration as head of Homeland Security from 2009 to 2013, supports the president's proposal to provide two years of free community college to students nationally.

"I like that idea," she said, adding that "it creates the expectation that our students should go beyond high school."

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Despite the steepening cost of tuition, most studies show the price tag is still worthwhile in the long run.

A recent Pew Research Center study found a difference of $17,500 gap in salaries between high school grads and college grads.

The median salary of a college graduate with a four-year degree is $45,500, compared to the $28,000 median annual earnings a full time worker with only a high school diploma would earn.

Napolitano adds, "Given the kind of world our young people are going to be graduating into, the more education they can get, the better off they are."

"On the Money" airs on CNBC Sundays at 7:30 p.m., or check listings for air times in local markets.