College classes have gone online. Why does it still cost so much?

By Joe Messinger, CFP®

September 4, 2020

3 min READ

Colleges were hopeful. They hoped to have students on campus and taking classes in person despite COVID-19. As we wrote this piece, some colleges are holding classes in person, but each day another college announces their classes will be moved to an online format. This list from The Chronicle of Higher Education tracks the status of nearly 3,000 institutions. As of 8/28/20, 49% were fully online, primarily online, or a hybrid (a combination of face-to-face and online offerings). 24% were still undecided with only 2.3% fully in person and 19% primarily in person. What does all this mean? It means there are lot of online college courses going on this semester!

Parents and students are understandably upset. Online courses are often not as good as the real thing–especially if they weren’t designed to be online in the first place. We have heard from some students who have online courses where the teacher is teaching virtually every class period, but too often, professors give students the read this book and answer these questions type of thing. Definitely not worth the high tuition price tag families are paying. Families have protested, and students have started petitions to try and get a price break.

Some colleges have tried to provide some relief.

Many colleges are considering additional aid for those families who need it because of COVID-19 hardship on a case-by-case basis like the University of Washington. However, across the board tuition breaks have been less frequent. Georgetown and Princeton are two of the “big” names discounting tuition by 10%. For the majority of colleges though, they simply cannot afford to cut tuition. Some universities have even implemented tuition increases like the University of Pennsylvania–despite being fully online.

What are the reasons colleges cannot cut tuition in these times of COVID-19?

The biggest reason is that the expenses the colleges are facing have not changed. The biggest costs faced by colleges are salaries and employee benefits. At public and private 4-year colleges, instruction is the largest expense category. The next largest category is “academic support, student services, and institutional support, which includes expenses associated with non-instructional activities, such as admissions, student activities, libraries, and administrative and executive activities.” Expenses like most of those as well as things like facility maintenance and utility costs don’t end simply because classes have moved online. In 2017–18, degree-granting postsecondary institutions in the United States spent $604 billion (in current dollars), according to the National Center for Education and Statistics. Public 4-year universities are spending over $46,000 per full-time equivalent student. (Privates are spending over $61,000. Ouch!)

Colleges are depending on those tuition dollars to stay in business, especially in these times when state funding is being slashed, and students are choosing to skip a year. Add on top of that the extra expenses universities are facing as they buy the tools to battle COVID-19. Other colleges are attempting to improve their online instruction capabilities and that costs money too. Every enrolled student and their tuition dollars is precious, and if students aren’t paying for room and board because they are staying home, then the situation gets even tighter.

Not all colleges are in the same boat.

Some colleges are more comfortable financially than others of course. For example, could Harvard choose to reduce their tuition? They have an endowment of $40.9 billion, and while they argue that their access to that endowment is limited (80% is restricted in its use), even a small percentage of $40.9 billion is still a healthy amount!

We can’t predict what this year when some colleges have cut tuition and others have not will do to pricing in the future. We do know that families are paying closer attention to what they are getting for their money, and they might not be happy about it.