Forbes recently reported that college tuition rose by less than the rate of inflation for the third consecutive year. Yet there is a cloud behind this silver lining. This measurement is based upon an inflation rate that recently saw its highest spike in a generation.
In addition to tuition, the various fees often added to the cost of base tuition continue to rise and proliferate. Unfortunately, IPEDS does not track the administrative fees charged by IHEs separately from tuition. It only tracks “tuition and fees,” separating out room and board but not the variety of other fees we charge students every semester. At one time, the list of these administrative fees was short and simple. In 2002-2004, a large flagship state university near me charged a program services fee and a technology fee to all students, whether residential or commuter. Twenty years later, it also charged a transportation fee, a “program and services services part B” fee, a library fee, and until recently, an international studies fee.
On many campuses, the types of fees proliferate even further: health and wellness fees, athletic fees, lab fees, orientation fees, financial aid loan fees, facilities fees, as well as others.
Hence, in addition to ever-higher tuition costs, students are being charged fees right and left. The reasons given for these numerous fees are almost always justifiable in isolation. Most students either participate in or spectate at athletic events; so, charge a fee. Almost all students use library services; charge a fee. Yet it is the cumulative effect of the fees that is so off-putting to some. Which of us hasn’t complained about the proliferation of airline fees or mobile phone plan fees?
It’s worth considering, therefore, whether the high number of fees associated with a college or university education is the best pricing strategy, especially in our current environment. Is the use of differentiated fees the best option for IHEs, or is the practice of bundled pricing a more helpful alternative?
Fees As A Percentage of Tuition
The term “tuition” in American higher education can mean different things depending upon the context. When we publish our annual tuition rates, we always separate tuition proper from the various fees students will owe. But in higher ed research, tuition and fees are lumped together to reflect the sticker price owed by any student, regardless of residential or commuter status. So to be clear here, when we refer to fees, we are not referring to room, board, textbook costs, loan fees, or any other specialized charges that may vary significantly depending upon the student’s situation. Instead, we are referring to those fees generally charged to all students for the delivery of the college or university experience.
Unfortunately, IPEDS (the Integrated Post-Secondary Education Data System) lumps these general fees into tuition as part of its data gathering. Hence, it’s more difficult to track the growth, proliferation, and comparative size of fees cross-institutionally. However, here’s what I found by reviewing tuition and fees data from three IHEs close to where I live: 1) a small, private institution with around 1,200 students; 2) a mid-sized, public regional university with around 14,000 students; and 3) a large, R-1 research university with around 36,000 students. This chart compares the tuition and fees for a full-time student at each institution during the 2002-03 and 2023-24 academic years. It also shows the percentage of fees as a function of the tuition cost.
| Institution | Tuition (full time) | Fees (full time) | Percentage of Fees as Function of Tuition |
| Small private (2002-03) | $6,490 | $255 | 3.67% |
| Small private (2023-24) | $38,800 | $1,650 | 4.25% |
| Midsized public (2002-03) | $1,655 | $228 | 16.76% |
| Midsized public (2023-24) | $3,975 | $1,000 | 25.15% |
| Large public (2002-03) | $1,738 | $290 | 16.68% |
| Large public (2023-24) | $5,666 | $1,076 | 18.99% |
Aside from the obvious growth in the cost of tuition over these 21 years, the other striking observations are that 1) the size of fees compared to tuition has grown, and 2) that size is significantly higher at public institutions.
Why Fees Are Increasing
Some of the increase in fees simply parallel the overall increases in operational costs by IHEs, and those cost increases are passed along to students. The biggest reason, however, is that public institutions have seen decreased funding from their state governments. In some cases, those decreases have been accompanied by mandates against significant tuition increases. State schools have had no choice but to increase student fees to keep needed revenues flowing. Private institutions also face pressures to limit tuition increases, but not to the same extent as public schools. Finally, the traditional student market demands much more in terms of services than did previous generations of students. Campus transportation fees, health fees, and even fees to pay for the construction of specific student amenities such as campus centers or athletic stadiums have all driven up the overall fee burden.
What, If Anything, Is To Be Done?
The title of this post presents us with the two basic alternatives. On the one hand, many advocate for spelling out these fees in detail to students. We’ll call this differentiated pricing. The other alternative, inclusive or bundled pricing, calls for a single, bottom-line price of attendance by lumping mandatory student fees into tuition.
The Case for Differentiated Pricing
Differentiated pricing provides students with a clear breakdown of costs. This breakdown demonstrates transparency and accountability during a time when persons are raising doubts about the trustworthiness of higher education, particularly in terms of finances. Further, not all students use all student services. And even those who do won’t all use them in the same way. Some students may not utilize campus health services. Students who live on campus may not use the campus transportation system at all, or at least not in the same way as commuters. And on the institutional side, differentiated pricing makes it easier for schools to track income and expenses for various services in a way that helps ensure the services pay for themselves.
The challenge for IHEs that employ differentiated pricing is that their proliferation raises questions about the meaning of the tuition charge. Take our cell phone bill for example. In addition to the cost of our cell phone service, many of us are also billed for an “administrative services fee.” This particular fee prompts the question: “If my main cell phone bill isn’t for administering the cell phone service, then what is it for?” Likewise, students and families rightly assume that tuition reflects the cost of instruction. But if providing lab gloves or library services is part of the cost of instruction, then why charge a separate fee for those items?
Further, isn’t the campus electric bill also part of the cost of instruction? Faculty salaries? Building and grounds maintenance? Then why aren’t those costs spelled out as fees as well? In other words, associating some of the operating costs with fees without itemizing them all can lead to the impression that some fees are arbitrary or even bogus. Students and families note that IHEs typically charge fees for services that students are most interested in (parking, athletics, student life) and not for things that students don’t rank as highly (grass cutting, building insurance, admissions ).
The Case for Inclusive Pricing
The primary benefit for inclusive or bundled pricing is simplicity. Many consumers–and I count myself among them–prefer to get one price for all services rendered. I chafe when airlines quote me a price for a plane ticket and then tack on an array of fees that reflect their cost of doing business rather than added value for me (and I include baggage fees as well as a variety of others). Likewise, students facing a differentiated pricing model are prone to feel like they’re being lowballed when handed the tuition bill, only to have that followed by an army of additional fees for services rendered.
Further, inclusive pricing provides students with a clear and predictable bill that they will have to pay. This predictability addresses the fact that the inability to pay for school is one of the main reasons that students decline to enroll or fail to return for the following semester.
Critics of inclusive pricing point out that it reduces transparency and may hinder informed decision making. I reply that the risk for less informed decision making is borne chiefly by the institution and not by the student. Students and families will appreciate the simplicity, even if it makes the bookkeeping more complex for the school. Moreover, accurate accounting should enable IHEs to track whether special services such as counseling or campus transportation are paying for themselves. Students don’t necessarily need to know that, nor will their knowing it make them more appreciative of the services provided. Students simply want to be assured that their needs will be addressed by the institution. And that’s what student service (what some call *****customer service*****) is all about.
Other critics of inclusive pricing point out that it will result in some students paying for services they may never utilize. But this argument can be made about absolutely any service the college or university offers, regardless of whether there is a separate underlying fee for that service. Indeed, merely because students don’t make direct use of a particular service doesn’t mean that they don’t indirectly benefit from it. Some students might have a cell service internet package and may never use the campus wireless technology. But that is not to say that those students never derive benefits from attending a school with strong wireless service. Some students may never darken the door of an athletic facility on campus. But those same students benefit tremendously from the vibrant campus atmosphere that athletics helps foster.
Is A Hybrid System Better?
Other administrators would prefer to adopt a hybrid system in which inclusive pricing is paired with a reduced number of fees that only some students would need to pay. I would reply that this is the system we already have. To preserve simplicity and the impression of financial integrity on the part of IHEs, I advocate that the fees that students of a particular enrollment type (full-time vs. part time; commuter vs. residential) should all pay the same basic price. The only fees that should be differentiated are for those that reflect the specific, measured decisions of students in advance regarding whether or how they will use those additional services. These fees include room (with graduated pricing depending upon the type of housing the student is assigned or chooses), board (with students choosing among various meal plan options), and specialized student opportunities such as international travel.
The Issue of Textbooks
Textbooks are another matter, as I have indicated in a previous post. The practice by some institutions of lumping textbook costs into tuition is patently unfair to students. This practice, known as inclusive pricing, routinely overcharges students for textbooks from the three largest textbook publishers. Inclusive pricing thereby enlists IHEs to help line the pockets of those publishers and fosters further increases in textbook costs. Instead, students should either buy their texts from the campus bookstore or from a third party vendor in the same way they would buy institutionally-branded merchandise. Or preferably, faculty would band together to help students save money by promoting the use of OER (Open Educational Resources) that are low-cost or free to students.
Conclusion
While both differentiated fees and bundled pricing have their merits, the clarity and predictability offered by bundled pricing hold significant advantages. Bundled pricing simplifies the billing process for students and fosters a more transparent understanding of their educational investment. This upfront cost structure empowers students to budget effectively and make informed financial decisions.
Furthermore, bundled pricing allows institutions to strategically allocate resources and prioritize student needs within a set budget. This strategic allocation fosters a more holistic approach to financial management, ensuring essential services are adequately funded while controlling overall costs.
Of course, bundled pricing requires careful consideration of student demographics and financial aid options. Institutions must ensure that necessary support structures are in place to address affordability concerns for students from low-income backgrounds. But within those limits, students will be better served within an inclusive pricing model.