The rising cost of higher education is a topic of large concern today. As tuition prices
continue to grow at a quicker pace than housing prices, consumer prices and average hourly
wages, it is becoming harder and harder for the average American family to afford going to
college. What factors have been driving this large rise in tuition prices? This thesis aims to set up
a supply and demand framework to analyze the various forces that may be driving the price of
higher education to rise above the Consumer Price Index over time. After defining long-run
supply and demand for the higher education market, this thesis addresses economy-wide factors
and summarizes the findings of Robert Archibald and David Feldman in Why Does College Cost
So Much?. Next, this thesis examines higher education-specific factors and specifically tests the
hypothesis: The long-run supply curve for higher educations is theoretically vertical. The
inability for supply to meet the increasing demand for higher education results in a supply and
demand imbalance that drives up the price of higher education. After looking at both economywide
and higher education-specific factors, it is apparent that slow productivity growth and large
wage increases for professors (cost disease) and an unresponsive total enrollment (supply) in the
face of rising demand are largely driving the increase in the price of higher education. In order to
curb this rising prices, his thesis will offer a few policy implications and recommendations.
Namely, online education and “blended” courses may offer viable solutions to increase the
productivity of professors and increase total enrollment at institutions.