The skyrocketing costs of college can lead a parent to wonder if an investment in higher education still makes sense. When he annual cost of attending a private college can easily exceed the annual salary a graduate receives during their first few years of work, this is especially true.  Doing the math can make the dream of college sound more like a nightmare for those parents who still have a number of years before their children reach college age. The change in estimated costs can bring some major sticker shock for those within a year or two of college. So, here are some of the major contributors to rising college costs, and what it might mean for your budget and planning. Inflation generally refers to the natural increase in the cost of living over time. It's generally accepted as a fact of life. In the broad economy, this annual increase has historically averaged about 2% while no one loves inflation. You would need $1.02 today to purchase what $1.00 bought you one year ago, in other words. The inflation of college costs has not been so gentle, averaging 4-6% annually. 

Understanding the rising cost of a college education

A college education costing $10,000 this year will likely increase by $400-600 next year, in other words. This means that college costs are doubling every 12-18 years, compared to everything else in the economy doubling in cost every 32 years in a nutshell. Why do college costs “inflate” so much faster than other expenses? While it's hard to put an exact finger on it, we can see that large portions of a school’s budget are more sensitive to inflation that the typical American household. Colleges need to replace technology more often than the typical family, for example. Also, teachers have been historically underpaid, and are finally getting some of the raises they deserve. Lastly, insurance costs for running large institutions and businesses have risen significantly since 9/11. One of life’s basic economic principles is that demand drives up prices. In other words, the more people want the same thing, the more that its price is likely to climb. This holds especially true with colleges, unfortunately for parents. The fact that more students than ever are attempting to get a college degree allows colleges to be aggressive in how they price their tuition. Because there are plenty of others willing to pay full fare, they do not have to worry about scaring off a few students with high prices. This demand is welcomed by schools since it allow them to expand their programs, add amenities, and raise staff salaries. They become one of the unlucky few who helps pay for what others receive in case your student is not one of the lucky few that receives a scholarship. This becomes a perpetual problem that seems to feed on itself. More students need scholarships as college costs rise. It continues to raise the price of higher education for the remaining students as larger scholarships are given.