California College Price Hikes Far Outpace Inflation, Private Tuition

With each passing school year, more and more California students, parents and media outlets cry foul that the cost of higher education is rising. But as the Golden State sinks further into debt, its education budget continues to suffer, and colleges are seeing a reduced flow of state-backed funds. To compensate, they’re raising prices—but at a much more alarming rate than most of us might expect.

“Soaring tuition and shrinking incomes are making college less and less affordable,” said Sen. Tom Harkin (D-Iowa), chairman of the Senate Health, Education, Labor and Pensions Committee, in an email to Bloomberg. “For millions of young people, rising college costs are putting the American dream on hold, or out of reach.”

But just how out of reach is that dream?

For Californians, some might say it’s nowhere in sight. Smart Money recently reported that in the past year alone, average fees for in-state residents rose 16 to 20 percent in four different states, one of which was California. To make matters worse, some predict that California is on the brink of seeing yet another double-digit increase by early 2013.

“The potential for this to get worse is very real,” said Rich Williams, the Higher Education Advocate for the U.S. Public interest Group.

When taking a step back and looking at those rate increases over time, the rising trajectory is even more astonishing.

By compiling undergraduate data from the Postsecondary Education Commission, we found that over the past 30 years, the price of Cal State colleges has increased by almost 2,000 percent, UC colleges have increased by just over 1,200 percent, and California Community Colleges have increased by nearly 1,000 percent.

Compare California’s rate of tuition increases with the rate at which tuition at Harvard University, one of the most prestigious colleges in the world, has increased, and we see an even more disappointing trend: The average tuition increase between 1981 and 2012 at California public colleges was 2.7 times the average tuition increase at one of the most prominent education institutions in the world.

Data on Harvard’s prices gathered from Harvard’s Financial Administration and Harvard’s Office of the Provost.

This trajectory is not to be confused with actual price. Harvard students currently pay more than $36,000 a year, whereas those attending UC colleges (California’s most expensive public school system) typically take out student loans for just over $13,000 a year. But the rate at which the California-based college prices have been climbing is what’s measured here.

Aside from the major discrepancy between California-based institutions and Harvard, it’s immediately apparent that California’s rate of increase is nowhere near as consistent as Harvard’s. The Ivy League’s rate is clearly very steady and lacks the sharp spikes that all three of its shown competitors boast. Over the past decade alone, Harvard’s year-to-year increases have ranged between 2.5 and 5.83 percent, whereas California’s UC system has seen increases between 0.73 and 37.66 percent.

Those sharp spikes become even more confusing when we overlay the rate at which the dollar has increased from 1981’s levels. Over the last 30 years, the value of the dollar has only increased by 147 percent. Harvard’s trajectory of increase somewhat resembles the rate of inflation, but California’s price increases are simply unreasonable when compared to the dollar’s value over time.

The worst part about these surreal price trajectories is that the bulk of the price hikes have occurred in the last five years.

Between 2007—when the Great Recession hit the country—and today, the costs of California colleges have nearly doubled.

This is particularly true when looking at the Cal State system. If a student could attend a Cal State college for four years, each at 2007’s average price, he or she would graduate with a student loan principal of approximately $14,084. But if that same student received a four-year degree by paying 2011’s average prices for each year, his or her student loans would have a principal of $25,688. That’s an 82 percent increase.

For reference, the value of the dollar has only increased 0.15 percent between 2007 and 2011.

While California’s college prices have spiked enormously in the past five years, an analysis of all of the price spikes reveals an even more disheartening trend. If we look at all of the major recessions our state and country have endured over the last 30 years, we see California’s response almost always includes raising prices for students. Price hikes during times of recession lead directly to higher-priced student loans and an increase in overall student loan debt.

To add insult to injury, a growing number of California’s community colleges are forfeiting their participation in the federal student loan program, effectively making it even more difficult for prospective students to attend California’s cheapest form of higher education.

According to California Watch, a child project of the Center for Investigative Reporting, 16 California community colleges now prohibit federal student loans out of fear that rising default rates may lead to sanctions.

In a time when education funding is being constantly slashed, these institutions are doing what they feel is necessary to retain their yearly stipend. But by cutting off federal student loans, which are invariably the preferred method of college financing, community colleges are shifting the burden from regulators and themselves to current college-goers using student loans to finance their education.

If California’s colleges continue to increase at a rate far and above the rate of inflation, and if they continue to cut off federal student loans and shepherd students into more expensive alternatives, the high level of default we see today may be just the beginning.

Raw data used in graphs and study: