College in America is 'engineering its own meltdown' with tuition inflation

A new study argues that skyrocketing college costs are a result of university leadership not prioritizing college affordability over profit.

The report by the American Council of Trustees and Alumni (ACTA), which looked at data from more than 1,500 four-year public and private, nonprofit colleges and universities, found that even though institutional spending has risen over the years alongside tuition, four-year graduation rates have not kept up.

"The spending habits of higher education have gotten us very poor results," ACTA President Michael B. Poliakoff told Yahoo Finance Live (video above). "We are taking a system of higher education that has been called 'the envy of the world' into a situation in which it seems to be engineering its own meltdown."

Poliakoff added that colleges were not financially strapped due to diminishing state and federal funding, but rather due to the "investment in bloated administration and student services programs that keep ratcheting up the price of tuition while not increasing that most important outcome, which is completion of the degree."

Tuition inflation in the 21st century has led to heavy borrowing and a student debt crisis that some lawmakers are urging the White House to address through broad cancellation of some federally-backed debt. Some schools are even leveraging federal funding from coronavirus relief packages to cancel debt owed by their students.

A female college student wearing a square academic hat made of one-dollar banknotes, US, 1981. (Photo by Alfred Gescheidt/Getty Images) (Alfred Gescheidt via Getty Images)

'Colleges and universities are not doing it right'

Poliakoff highlighted a couple of examples of schools that he believed got the balance right.

"Purdue has kept its tuition frozen for ten years," Poliakoff noted. "It has lowered administrative costs under the leadership of President Mitch Daniels." He also highlighted Arizona State University and Florida State University as schools that lowered administrative expenditure.

However, overall, "our colleges and universities are not doing it right," he added. "They need to look towards those positive examples, and their trustees have to be absolutely meticulous and ask those hard questions. It's wonderful to spend money on programs and to have new offices, but they have to ask what will be the impact of this."

The cost of college tuition over time. (Source: College Board, NCES, IPEDS) (College Board Annual Survey of Colleges)

—

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

Read more:

• Student loan forgiveness 'doesn't solve the crisis long term,' expert explains

• Data highlights the difference in perceived and actual value of a college degree in America

• Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.