Why Is College So Expensive? The Real Reasons Behind Rising Tuition and What Families Can Do About It

Every year, families ask the same question:

Why is college so expensive?

Tuition has increased dramatically over the last several decades, and while inflation plays a role, it doesn’t tell the whole story. In the latest episode of the Ol’ College Try Podcast, College Aid Pro Co-Founder, Matt Carpenter, and Director of Education, Peg Keough, dig into one of the biggest questions in higher education today. Rather than blaming a single factor, they explore the many forces driving college costs higher and why families still have more control than they may realize.

First, a Quick Update on the New Parent PLUS Loan Caps

Before tackling the bigger conversation, Matt and Peg revisit one of the most significant financial aid changes families are facing this year.

As of July 1, 2026, Parent PLUS Loans are now capped at $20,000 per year and $65,000 total per student. For decades, many families relied on these loans to cover virtually any gap between financial aid and the full cost of attendance. That safety net no longer exists.

At the same time, Sallie Mae has introduced a new private parent loan designed to fill some of that gap. Unlike the federal program, however, borrowers must qualify based on credit, and families with weaker credit may face much higher interest rates or be denied altogether.

Their advice is simple: borrow responsibly. Just because a lender approves you doesn’t mean the loan is affordable, especially when you’re making the same decision four years in a row.

Why Has College Become So Expensive?

There isn’t a single answer.

Instead, college costs have climbed because of a combination of market forces, government policy, institutional decisions, and consumer behavior. Each piece has contributed to the system families face today.

Colleges Continue Charging More Because Families Continue Paying

Like any business, colleges respond to demand. If families continue enrolling despite rising prices, schools have little financial incentive to slow tuition increases.

Matt argues that many colleges have shifted away from acting like public-serving institutions and instead operate more like luxury brands. Prestige often comes from becoming increasingly selective while charging more each year, rather than expanding access to more students.

Consumers Have More Power Than They Think

Peg believes one of the most overlooked parts of this conversation is the role families themselves play.

Parents routinely stretch their finances to send their students to expensive colleges because they believe it’s the “best” option. As long as consumers continue making those choices, colleges will continue charging premium prices.

Her message is clear: families are not simply victims of the system. They still have agency. Choosing an affordable college isn’t settling it’s making a financially responsible decision that can benefit a student long after graduation.

Federal Lending Helped Fuel Tuition Growth

For years, unlimited Parent PLUS borrowing made it possible for families to finance almost any college bill. While the program was created with good intentions, it also removed many of the natural limits on what families could borrow.

Because colleges knew that many parents could access additional federal loans, there was little pressure to keep prices in check. Matt believes the new borrowing caps could eventually force colleges to rethink pricing as fewer families can simply borrow whatever amount is needed.

Wall Street Has Found Opportunities at Every Stage

Whether families are saving through 529 plans or borrowing through private lenders, financial institutions have become deeply connected to the college financing process.

Matt notes that hundreds of billions of dollars are currently invested in 529 savings plans alone. While these plans remain excellent savings vehicles, they also illustrate how many industries benefit financially from an increasingly expensive college system.

Colleges Are Spending More Than Ever

College campuses today look very different than they did a generation ago.

Luxury residence halls, upscale dining options, climbing walls, modern recreation centers, and major research facilities all cost money to build and maintain. Many schools are also carrying significant debt while trying to compete with peer institutions for students.

Although these investments can improve the student experience, they also contribute to rising tuition bills.

The Biggest Mistake Families Make

Throughout the conversation, Matt and Peg return to one central idea: emotion often drives college decisions more than affordability.

It’s natural to want to help your child attend their dream school. But before committing, families should ask whether that school is financially sustainable for all four years not just the first semester.

A college education should create opportunities, not decades of unnecessary debt.

Success Isn’t Determined by Prestige

One of Peg’s strongest messages is that the most selective college isn’t necessarily the best one.

Research has shown little relationship between a school’s selectivity and the quality of teaching. Students who find the right academic fit, graduate with manageable debt, and take advantage of opportunities often achieve outstanding outcomes regardless of the institution’s ranking.

The Bottom Line

College has become expensive because of many interconnected forces, not one single cause. Colleges, lenders, government policies, and consumers have all played a role in creating today’s landscape.

The encouraging news is that families still have choices.

By understanding affordability before applying, comparing true net costs instead of sticker prices, and making thoughtful borrowing decisions, families can find a college that fits both their student’s goals and their financial future.

As Matt says throughout the episode, the goal isn’t simply getting into college it’s graduating without creating financial problems that last for decades.