The Real Cost of College: Then and Now

In 1980, the average annual tuition and fees at a public four-year university was about $800. Eight hundred dollars. Adjusted for inflation, that is roughly $3,040 in today's money. The actual average for the 2024-25 school year? Over $11,600 at in-state public universities and north of $43,000 at private institutions.

These are not numbers that can be explained by normal inflation. College tuition has outpaced the general CPI by a factor of roughly 3 to 4 over the past four decades. If a gallon of gas had risen at the same rate as tuition, you would be paying about $12 per gallon today.

So what happened? Several forces converged.

First, state funding got slashed. Public universities used to receive the bulk of their operating budgets from state legislatures. Starting in the 1980s and accelerating sharply after the 2001 and 2008 recessions, states cut higher education funding per student dramatically. Universities compensated by raising tuition. The burden shifted from taxpayers to students and their families.

Second, the student loan system made it easy to borrow enormous sums. The federal government expanded student loan programs significantly in the 1990s and 2000s, and private lenders followed. When students can borrow more, schools can charge more — a dynamic economists call the "Bennett Hypothesis." The availability of easy credit effectively removed the price ceiling that would normally constrain tuition growth.

Third, universities expanded their operations well beyond core academics. The arms race for students led to massive investment in luxury dormitories, recreation centers, administrative staff, and amenities that would have been unthinkable a generation earlier. These costs get passed directly to students.

The minimum wage comparison makes the tuition story even more striking. In 1980, a student working full-time at the minimum wage ($3.10/hr) over the summer could earn roughly enough to cover annual tuition at a state school. In 2024, a student would need to work about 1,600 hours at the federal minimum wage — that is 40 weeks of full-time work — to cover in-state tuition alone. Room, board, and textbooks are extra.

The downstream effects are now a defining feature of the American economy. Outstanding student loan debt surpassed $1.7 trillion in 2024, exceeding credit card debt and auto loan debt. Borrowers are delaying home purchases, having fewer children, and saving less for retirement. The ripple effects of unaffordable education are showing up in housing data, birth rate data, and retirement savings data.

There are no easy fixes. Some advocate for free public college, funded by higher taxes. Others argue that the focus should be on expanding trade schools and alternative credentials. Student loan forgiveness addresses existing debt but does nothing about future tuition increases. The one thing nearly everyone agrees on is that the status quo — where the cost of a bachelor's degree rises faster than almost any other expenditure — cannot continue indefinitely.

The data is clear: college has gone from a modest investment to a life-altering financial commitment in the span of a single generation. Whatever your politics, the numbers do not care. They just keep going up.