A college education is now the second-largest expense an individual is likely to make in a lifetime — right after purchasing a home. Ironically, one of the reasons the price tag continues to climb is the abundance of loan dollars that discourages schools from keeping their costs in line.
While families are paying less out of pocket than in the past, they are relying on loans, scholarships and grants more than ever before.
Aid such as the income-based federal Pell grants covered 34 percent of college costs in 2015-16, up from 30 percent in the previous school year, according to a recent report by education lender Sallie Mae.
The second-highest proportion came from parent income and savings, which averaged $6,867, or 29 percent of total spending on college, followed by borrowed money, which covered 20 percent of college expenses in 2015-16. Overall, 2 in 5 families borrowed money to pay for college during this school year, Sallie Mae officials said.
Tuition has historically risen about 3 to 5 percent a year, according to the College Board. During the recession, declining public funds caused tuition to skyrocket. At private four-year schools, average tuition and fees rose 54 percent in the last decade. Tuition plus fees at four-year public schools, which were harder hit, jumped 71 percent over the same time period.
"One of the biggest things we have seen is the disinvestment from states and this has been particularly problematic for public institutions," said Megan McClean Coval, vice president of policy and federal relations at the National Association of Student Financial Aid Administrators.
College enrollment is also on the rise but competition among schools for top students is fierce. That means universities must spend more money to attract and retain high-quality faculty, hire administrators, build and maintain the latest facilities, and offer an array of amenities.
"The price tags are getting scary to many families but the long-term benefits of education are still there," said Robert Kelchen, an assistant professor at Seton Hall University's department of education.
Factoring in loans and aid that makes college more affordable, there is little incentive for schools to slow the pace of tuition increases, said Eric Greenberg, president of Greenberg Educational Group, a New York-based consulting firm. "As with any commodity, the more dollars chasing that commodity, the higher the prices will be," he said. "It's a cycle."
"It's been, from the beginning, a market-driven system," said Ray Franke, an assistant professor of higher education at the University of Massachusetts in Boston.
While public schools are held accountable by a state governing board, they often are likely to approve any proposed tuition increase to ensure their institutions are financially viable, Franke said. At private colleges, one of the few things keeping tuition hikes in check is the "perception of affordability," Kelchen said.
As a result, tuition increases are "still outpacing inflation and far outpacing family income," said Ben Miller, senior director of post-secondary education at the Center for American Progress.
Families with students in four-year private colleges spent about $43,900 in 2015-16; at four-year public colleges, it was more than $19,500. At community colleges it was$3,400, according to the College Board.
But within the three categories of schools — private colleges, state schools and community colleges — "prices are not really correlated to the quality of the school," Greenberg said.
"There are very few scenarios where the price for an excellent commodity and a much less good commodity cost the same," Greenberg said. "College is one of those examples."
Not surprisingly, low-income students were less likely to attend four-year colleges, whether they were public or private, Sallie Mae said. In fact, 39 percent of students from low-income families attended community college, a significantly higher proportion than students from mid- and high-income families (29 percent and 22 percent, respectively).
"Lowest-income students are the hardest hit but the effects of more expensive education are creeping up the income spectrum," Miller said.
"At some point we will see the breaking point," Franke said. "As of now, we are still coming to the conclusion that college is still worth it but if we continue this path, that is going to change."
The top concern parents and students say they now share — across the board — is footing the bill for college and the resulting debt burden, according to The Princeton Review's 2016 College Hopes & Worries survey. Contrast that to a decade ago, when the most commonly cited answer was not getting in to their first-choice school.
Many graduates have also expressed buyer's remorse regarding the cost of their education, according to a separate survey by Citizens Bank. To that point, 57 percent said they regret taking out as many loans as they did, and 36 percent said they would not have gone to college if they fully understood the associated costs.
Greenberg advises families to look at a wide range of schools, and don't assume that a private college is necessarily better than a state school. "It's a matter of a student's interests and aspirations, career prospects and the finances of the family," he said.