Why are US universities like Harvard are so expensive?

If you ever wanted to get your undergrad and master’s education from top universities then you will find many American universities on the top list for engineering and other degree courses on the global list.

But the problem with American universities is it is very difficult to get admission into such as Harvard and Stanford and also they are very expensive to get into on the other hand.

Now because these universities have tough admission processes and less acceptance rates which is a good thing because they not only select students based on their academics but

upon their overall skills and personality which makes sense but in this article, we will take a look at what are the reasons why American universities are so expensive to get admission into.

So without further ado let’s dive right in.

Why are US (America’s) universities & schools so expensive?

there are multiple factors that led to the expensive degree from American universities more students want to get their under graduation to get a job and getting a loan is easier and also there has been less state aid to the colleges which also led to higher tuition fees.

Federal loans

Federal loans are the loan that you get from the government of America, and this is one of the primary reasons why tuition fee at American University is really expensive.

According to Forbes, more than 92% of the student loans are federal and the total debt is around 1.6 trillion dollars which is humongous number.

Basically there are two types of federal loans subsidised where the government pays the interests of your loans on your behalf and in unsubsidised You will have to pay the interest instead.

What’s more amazing is the average student loan is around 39000$ and there are more than 2.6 million students with more than $100,000 loans to be pay and more than 45 million students in America have loans and debt to pay back.

Similarly, The American government also provides something called pell grants, basically these are money like scholarships you get from the government which do not have to be paid back again so it helps students with low income pay for college and education expenses, the amount of money you receive can range between 600-6,500$ depending upon factors including tuition fees academic year you are studying and you need to apply for student aid which is called as FAFSA to be eligible for this grant of US department of education.

And because taking a student loan & financial aid from the government is easily available, so more students are trying to get admission into the top colleges, which means there is a high demand, but the seats are very limited as there is less supply,

there is a mismatch between demand and supply, so the tuition fees for colleges and universities is expensive so only best students can get admission and universities capitalize on this student loans.

Growing competition between universities to be the best university

Another reason is there is a growing competition between the universities to be the best in the world.

It is not just American students but more than 1 million students from international countries like China India and South Korea visiting American universities to study for higher education.

And because most of the top universities like Ivy League, Stanford MIT Chicago, Pennsylvania, etc are privately owned, These universities always try to attract the best students, and what makes any University the best is factors like,

  1. Research facilities & infrastructure in the University
  2. Professors and faculty
  3. Academics and education
  4. Placement offers
  5. Scholarships and financial aid

And all these top universities try to have the best them all like research facilities and infrastructure so that more students can get attracted to their university over others.

And, according to a study, more than half, 45-50% of private universities’ tuition fees revenue is given to scholarships and financial aid for the students.

To understand this situation better, Let’s take a look at Harvard for example, Harvard University founded in 1636, Is the oldest university in America, and it is second best university in world According to US news.

The standard tuition in Harvard is $51,143 without any financial aid, up from $49,653 a year earlier, the total price tag to a hefty $74,528.

So It will cost you around 75000 dollars to get your first year degree from Harvard University so it is really expensive, You can read pros and cons of Harvard degree here.

And According to CNBC,

The Harvard Crimson report that the fund’s total value during the 2019 fiscal year is $40.9 billion, a $1.7 billion increase from the previous year.

Last year, the school used $1.9 billion from the endowment, to cover some of the school’s operating costs, operation cost take up to 35% of the expense.

And according to the latest data 70% of the money is spent on various costs, 24% on professorships, 19% on scholarships, 7% on research and development projects, 4% on museums and libraries maintenance, 2% on faculty and teaching, etc

According to Harvard.

Two categories where a large percentage of the money is spent is for the professorships of the faculty and for the financial aid of the students that the university offers.

Harvard students have access to some of the greatest scholars. There are many Nobel laureates Pulitzer prize winners who teach and take seminars to the Harvard students which is really great but all of it comes at a price, the average salary of Harvard professor can range between 25,000 to 660,000 USD and the median is 120, 000.

Administrative costs also grown in universities which is also a reason for higher university cost.

Similarly Harvard University has this crazy scholarship plan where families host financial income is less than $75,000 per annum have to pay no money to enrol their student to study in the University for free and the student will get complete scholarship, because of this 20% of the Harvard families get this benefit.

This is a huge expense as I already mentioned earlier that 45% of the revenue collected from tuition fees in the colleges and universities are paid in the scholarships and financial aid for the students.

You might wonder, why Harvard does not use its massive endowment fund to reduce the tuition fees, it is because they want to sustain it for future and they only spend 5% of the endowment fund every year in the college expenses so as they offer more scholarship and financial aid, they try to recover the money from increasing the tuition fees for the remaining students in Harvard.

There are many facilities like libraries, classrooms, libraries, Recreational and social spaces, Archival and other research materials, Laboratory spaces and equipment, all of which have costs to maintain.

And there are other operational costs such as maintaining the infrastructure and facilities which is also a big factor for attracting many students worldwide to Harvard, The University’s operating surplus for the year was $282.7 million.

Universities like Harvard, Ivy League, and Stanford focus a lot on sports activities and they have a lot of facilities for that like coaches, competitions, and grounds, it is not bad as sports provide overall development to students but the point is they all come at a cost!

Apart from Harvard other universities like Stanford and MIT also have best faculty and professors like Nobel laureates, authors, etc To whom they have to pay the salaries and they also focus on giving best infrastructure and facilities which have a lot of cost, to maintain all the costs universities charge more money through tuition fees.

More focus on research than teaching

Another reason for higher expensive education is because these universities focus more on research than teaching.

As a matter of fact Harvard is the best university in the world in terms of releasing research publications and papers.

And as per the above report of CNBC, Harvard financial report states that, 7% of funds is used on research costs, 4% goes toward the school’s libraries and museums, 2% goes toward faculty and teaching,

In Harvard, More than two dozen University buildings are used exclusively for scientific research. Their interconnected labs, clusters, and offices encourage scientists to cut across boundaries and collaborate in the chemical, biological, physical, engineering, and computational sciences.

Not just Harvard but other universities like Stanford and MIT also focus on research a lot, because research and publications that the university is what makes them very prestigious and popular, and there are many reasons why research is very important for students like research helps in improving memory and problem solving skills in the students, and you can come up with new ideas innovation and technology for the problems.

And because these universities focus more on research compared to teaching the stuff in the classroom, students graduated from this colleges also have high salaries and packages because they have better skills and knowledge compared to other colleges and because these universities focus more on research compared to teaching, they have higher tuition fees because doing research comes at a cost which they can balance by getting tuition fees from the students.

Lower state aid

Another big reason for expensive education in university is decreasing state aid to the colleges.

The basic meaning of a non-profit university is, these colleges are the more traditional colleges that come to mind. They receive funding from the government, tuition, and endowments. That money is generally used to put back into the curriculum, instruction, and other college operations. But,

Overall state funding for public two- and four-year colleges in the school year ending in 2018 was more than $6.6 billion below what it was in 2008 just before the Great Recession fully took hold, after adjusting for inflation. In the most difficult years after the recession,

colleges responded to significant funding cuts by increasing tuition, reducing faculty, limiting course offerings, and in some cases closing campuses. Funding has rebounded somewhat, but costs remain high and services in some places have not returned.

The government is providing lesser money to this nonprofit universities so these universities have to get their money from somewhere so that they can afford the expenses of the university and this is where the increase the tuition fees to get the money because of which universities are expensive to get education from.

Degree is still important

And the last main reason is degree is still very important and more number of students are getting graduated from colleges every year.

In 2020, about 37.5 percent of the U.S. population who were aged 25 and above had graduated from college or another higher education institution. This is a significant increase from 1960, when only 7.7 percent of the U.S. population had graduated from college

Of the nearly 225 million adults in the U.S., almost 94 million have earned some type of college degree, Increased educational attainment directly correlates to higher levels of employment. But in addition to better employment outcomes, individuals with college degrees are also more likely to earn better wages.

And because there are more number of students getting graduated from college every year in America, the demand of college degree is more but there are limited seats so it is also a big reason why college degrees is very expensive in America.

So overall it is a combination of many factors including higher cost of faculty and professors, more emphasis on research than teaching, operational cost of university, lower funding from the government, easily available student loans like subsidised and unsubsidized loans, Etc which made University education very expensive in the United States.

With that said let’s end the article.


These are all the things you need to know about why American universities are very expensive

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