College Tuition Keep Rising. Here's The Hidden Reason Why

Forbes

14-07-2025

Everyone Says They Want Lower Tuition. Then They Ask For A Climbing Wall
Everyone Says They Want Lower Tuition. Then They Ask For A Climbing Wall.
It's that time of year again—the moment when tuition bills land in mailboxes and inboxes across the country. Over the next few weeks, most colleges will send tuition invoices. Whether you're a college student staring down the balance due, or a parent supporting one, you're probably wondering: why does it cost so much to get a college degree these days?
Six years ago, I left a job on Wall Street to take a job as a college president. As I entered this new role, my primary concern was the rising cost of tuition -- not just at the college I lead, but at every school. Viewing it through the lens of corporate finance, one thing became disturbingly clear: the underlying business model of higher education is deeply flawed. In many ways, it operates less like a sustainable enterprise and more like a high-stakes game of musical chairs. The system functions smoothly—at least on the surface—as long as new students keep coming who are willing to shoulder ever-increasing costs. But when rising tuition outpaces the value delivered, the return on investment in a college degree inevitably erodes.
What doesn't make sense is why no one is doing anything about it. After all, the crisis facing higher education is well-known. For example, the BestColleges report notes that over 80 nonprofit colleges have closed or merged since 2020. And the Federal Reserve Bank of Philadelphia predicts that up to 80 closures could occur annually, beginning this year
Nearly every college president in the country already possesses a firm grasp of the scope, severity, and urgency of the problem. So why are so few higher education leaders trying to solve it?
The Incentive Problem
At first, when I stepped into the presidency, this was simply a puzzle to me—a mystery I couldn't explain or understand. But I shrugged it off, focusing instead on charting a different path and becoming the exception to the rule. More than six years later, it is clearer to me why solving the problem of rising tuition is so difficult. It's the same reason any persistent problem doesn't get solved: those in a position to solve it are heavily incentivized not to.
Solutions to problems usually occur because a single condition is met: there is some sort of reward for solving it. That's how progress is made. That's why people are willing to take risks, and experiment, and keep trying after they fail—if they solve the problem, they get a reward. So in those instances when problems aren't solved, we need to look at incentives before anything else. That's usually where the trouble lies.
This dynamic isn't unique to academia. It mirrors what we see in electoral politics. Commentators have long pointed out that what's best for the politician often isn't what's best for their constituents or the country as a whole. A Stanford School of Business article highlights how politicians often maintain outdated politics because it's more advantageous electorally than serving the broader public good.
The politicians who focus exclusively on keeping their jobs tend to be the ones who stay in office. Those politicians who try to do what's best for the country tend to be the ones who are sent packing in November. There are exceptions, of course—every once in a while, a senator will come along who decides to do what's right and lives to tell about it. But after surveying 200 years of American history, John F. Kennedy was able to find only eight of these. These stories were exceptional enough to become material for a best-selling book, Profiles in Courage.
Key Stakeholders Are All Pushing Costs Higher
It took me a few years to realize that college presidents are in much the same situation as politicians. The reason courage is so exceptional among our ranks is because courage is not rewarded. Rather, the best way for college presidents to keep their jobs is by focusing primarily on keeping their jobs. And when it comes to the cost of tuition, that usually means allowing costs to grow higher, in order to satisfy the desires of key stakeholders.
Let me explain. There are four key stakeholder groups that college presidents must keep happy: students, faculty, donors, and the board of trustees. On some issues, their interests diverge, and the president becomes a referee. But when it comes to cost, they share a common posture—even if it's not always articulated. Each group, in its own way, exerts pressure that drives tuition higher.
They may not say it out loud. They may not even realize it. But collectively, they're asking for more costs—not less.
What Students Say vs. What They Want
Students, of course, say they want lower tuition—as do their parents. But then, they'll turn around and ask for things like nicer dorms, upgraded dining options, new athletic facilities, and improved amenities. And to state the obvious, all these things cost money.
This dynamic is true only to a point. Any student who gets into Harvard could likely get a full-ride to a number of colleges with better facilities, yet they still choose Harvard. But that's not the real scenario facing most students. Rather, the actual decision is usually between College A and College B, both of which are relatively on par academically. And in that situation, with all else being equal, facilities and amenities typically become the deciding factor. If you doubt this, talk to any college admissions department.
The Role Of Donors
The good news is that donors love to fund these kind of buildings. The bad news? That's almost exclusively what they love to fund. A 2024 Gordian analysis found that campuses are investing more than ever before to expand their physical footprint–even as enrollment declines nationally. Donors may say they want to support student access and affordability programs, but what usually inspires an actual check is a building project. Buildings are tangible, visible, and we can put their name on it.
In theory, if a new building is funded by donor money, it can be built without increasing tuition or fees paid by students. The trouble is that it's extremely rare to receive a gift that covers 100 percent of a project. And even in those exceptional cases where the upfront costs are paid in full by a gift, there are still the additional expenses associated with new spaces - things like support staff, utilities, IT, and various other forms of overhead. A new building is never a one-time expense. It rather necessitates a permanent increase to the annual operating budget. The result is higher costs.
Faculty Requests
Faculty, for their part, are less concerned with facilities. But they do frequently champion things like new programs, new academic centers, more research dollars, and higher compensation. These are not selfish or unreasonable requests. Just like in any other profession, the daily life of a professor can look very different depending on how well funded their institution or department is.
If a professor starts publishing noteworthy research, it won't be long before they get an offer from a larger, more reputable school. As this salary analysis shows, professors at elite institutions often earn double the salary while teaching half the course load. If a professor has been making $75,000 a year teaching four courses each semester, and someone comes along and offers them $150,000 to teach two courses each semester, that's hard to turn down. Unless, of course, your current institution can match it.
Board Priorities And The Chase For Prestige
The last key stakeholder group is the Board of Trustees. In theory, this should be the constituency pushing for lower costs. But in practice, most boards aren't terribly interested in the minutiae of fiscal responsibility and operational efficiencies.
Rather, higher education boards spend most of the time talking about institutional reputation and prestige. To preserve or increase the college's level of prestige is always a competitive endeavor. It means new things. New programs. New facilities. And of course it means trying to climb in the rankings. Meanwhile, every other school is trying to do the same thing. And each aspect of that arms race requires money.
The Path Forward
To be clear, this situation isn't anyone's fault. But it is a mess. And until we clean it up together, the future of American higher education will remain perilously in question.
Real solutions will require courageous leadership—not just from college presidents, but also from students, donors, faculty, and boards who band together and say, 'We believe something must be done about the ever-rising costs. And we're ready to start here.'