Editor’s note: The cost of college—its historic rise and how to navigate current expenses—is intertwined with the issue of student loan debt. This page focuses on understanding the costs of (and how to pay for) higher education; see our resources on student debt here. Background Since the middle of the 20th century, higher education has been viewed as a steppingstone to well-paying professional careers for millions of Americans. Earning a degree has become a viable path to upper-class prosperity for many, in particular first-generation college students. But, it can be costly. As of 2025, annual tuition alone ranges from around $10K for an in-state, four-year public university to almost $40K for private institutions. The total price tag—when including living expenses, fees, and other costs—for a bachelor’s degree in the US can now exceed $100K for public institutions, requiring the majority of students to secure financing to cover the cost of education. History In 1950, around 2.3 million Americans were enrolled in college, or about 1.5% of the population (historic census data). By 2023, this percentage had risen to 7%—or 24 million students—and more than one-third of adult Americans had completed a four-year program. In 1958, the National Defense Student Loan program was created to focus on developing students in areas deemed critical to national security. The 1965 Higher Education Act broadly expanded federal student aid to the general population. Find a thorough history of federal student aid policy here. Even accounting for inflation, average tuition and fees have more than tripled since 1970 (see tables). Covering Costs On average, contributions from parents (39%) and college savings funds (11%) cover roughly half of the cost of a college academic year. To pay for the remainder, students rely on scholarships, grants, work-study programs, and loans. One primary mechanism to save for college is a 529 plan. These tax-favored accounts grow tax-deferred, and withdrawals aren’t subject to state or federal taxes if used for qualifying educational purposes. The federal work-study program allows students to earn financial aid while getting practical part-time work experience. Average awards are small relative to tuition costs, around $2K annually. Fewer than one in 10 students receive a scholarship. An estimated $46B in public scholarships are given each year (along with about $7B in private scholarships). Search through more than 9,600 scholarship opportunities here. Around 40% of students take out loans each year, with the vast majority relying on federal loan programs. There are three general types—subsidized (interest does not accrue while in school), unsubsidized, and options for parents and graduate students. Applying for federal student aid is free. Students must fill out a FAFSA (Free Application for Federal Student Aid) by Oct. 1 for the following school year. See how to follow the process and find the link to download a FAFSA form here. Are Costs Sustainable? The rising cost of higher education has sparked public debate over the return on investment of the decision to attend college. Many high-profile universities have begun to offer generous aid packages and claim full sticker price costs are only paid by a small percentage of enrollees. A consequence of rising college costs is accumulating student loan debt. More than 43 million Americans hold a total of $1.6T in outstanding federal loans, with the average household with student debt owing around $55K.
Hours of research by our editors, distilled into minutes of clarity.
Around two in five students in any given academic year take out some form of student loans, and 90% of those who do, rely on federal loan programs. These federal loans come in three flavors—subsidized, unsubsidized, and options for parents and graduate students. Each option has its own financial considerations; see an overview of each, along with what to consider when borrowing funds to cover higher education costs.
The dramatic rise in the cost of higher education has a number of causes, ranging from increased number of students to administrative expansion at institutions. Even when accounting for inflation, the cost to pursue a degree has tripled over the past six decades. See data from the National Center for Education Statistics breaking out costs by institution type and year.
The plans can be used to pay for any qualifying education expenses from kindergarten to college, including tuition, fees, room and board, and even computers. Anyone can set up as many 529 plans as they want for relatives, friends, or themselves.
Harvard University holds the world's largest academic endowment, valued at $53.2B in fiscal year 2024. This official Harvard webpage explains how the endowment supports the university's mission, funding areas like financial aid, faculty positions, and research initiatives.
This Investopedia article provides a comprehensive overview of financial endowments—donations made to nonprofit institutions like universities, museums, or hospitals. It explains how endowments are structured, the various types (such as restricted and quasi-endowments), and how they are managed to support an institution's mission over time.
Parents can open a custodial Roth IRA when their child starts to earn income (think: summer job), which can help them start saving early. For example, 529 accounts help parents save for college, while UTMA/UGMA accounts function like trusts.
More than $50B in scholarships are awarded each year, though analysts estimate more than $100M goes unclaimed due to a lack of qualified applicants. That fact should be unsurprising given the dizzying number and criteria for thousands of applications. This portal from the US Department of Labor lets you quickly search more than 9,600 scholarship opportunities by program, eligibility criteria, and more.
Apply for billions of dollars in scholarships, grants, loans, and Federal Work-Study funds using the Free Application for Federal Student Aid form. Get an overview of how the FAFSA form can help you finance your education with money from the federal government, your state, and school; understand when to apply; and find out what you’ll need to fill it out.
From the US Department of Education, this portal provides everything you need to evaluate colleges. The college scorecard provides handy data on every school, from graduation rates to annual average earnings out of school, while the net cost calculator directs you to each school’s calculator that allows you to estimate the cost of college based on your unique circumstances.
The parent explains the basics of what a 529 is, its advantages, and how it works, breaking down portfolio options for investing in 529 plans using Vanguard as a provider.
The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.