Last October, the annual Trends in College Pricing report released by CollegeBoard delivered a pleasant surprise: When taking into account inflation, the average tuition and fees for attending an in-state public university in 2024 decreased from a decade earlier by 4% — from $12,140 to $11,610.
While some economists cite potential economic slowdowns and the end of pandemic-era tuition freezes as reasons this trend is only temporary, I contend that a decline in demand for college education may drive the cost to continue dropping.
Why is the demand for higher education decreasing? The most significant reason is demographics: Although the number of high school graduates is expected to peak this year, a long-predicted, steady decline will follow — with high school graduates decreasing from 3.9 million in 2025 to 3.4 million in 2041, according to the Western Interstate Commission for Higher Education’s 11th edition of the “Knocking at the College Door.” Simply put, the demand for college education shrinks because there will be fewer customers in the coming years.
The total number of high school graduates is expected to peak in 2025 and then decline steadily through 2041.
Meanwhile, the pandemic threw millions of students into online classes, and some of them seem to like it there. A recent survey found that the number of high school juniors and seniors planning to attend fully online colleges has more than doubled since before the pandemic. According to the National Center for Education Statistics, there were more than 4.9 million exclusively online learners in higher education as of fall 2022. If this trend continues, the demand for traditional on-campus college education may further erode.
Compounding the situation is the deteriorating perception of the value of a college degree. According to research conducted by Pew Research Center, only one in four Americans nowadays think that having a bachelor’s degree is extremely or very important to getting a good job. College education has become less attractive to many young people. They are not only concerned with the cost, ranging from $119,640 in-state to $196,320 out-of-state, for an average 4-year public college degree and potential student debts, but are also skeptical of the return of investment for their post-graduation career.
So it’s not surprising that more young people have forgone college altogether recently to pursue alternative paths such as trade schools, apprenticeships or entrepreneurship right out of high school.
Now, how does the declining demand for college education affect tuition? A decline in demand for a product or a service can affect market equilibrium by causing a surplus, resulting in potential changes in price and quantity sold. College education is no exception to the law of demand and supply.
Most colleges have several fixed assets with few alternative uses — buildings, dormitories and laboratories, to name a few. Furthermore, tenured faculty are difficult to lay off. Rather than maintaining the tuition and receiving a hit in enrollment numbers, I believe public colleges are more willing to lower tuition to raise enrollment, thus making use of their vacant space and their tenured faculty.
The cost stabilizing or even decreasing public college tuition can be achieved through institutional efforts to control costs. Many colleges have also adopted creative and innovative pricing strategies. For example, Bellarmine University in Kentucky has introduced the Public Price Promise, which guarantees students with certain academic credentials that they will not pay any more than the tuition, fees, room and board at the flagship university in their home state.
The cost of attending public colleges appears to be stabilizing, representing a significant departure from the rapid increases of the past few decades — a reason to believe further steps and innovation in funding higher education can increase affordability. Students and families can now celebrate one of the rare moments of financial relief on the path toward higher education; the time for reduced public college costs has finally come and may stay for years to come.
