Many colleges require freshmen to live on campus in their first year for a myriad of reasons. “Helping with the transition to adulthood” is one of the most common ones, and that would make sense if they didn’t charge a lot of money for these accommodations. Why are college dorms so expensive?
College dorms are so expensive for many reasons. Inflation is a factor, but the administrators often include the cost of utilities, renovations to keep up with modern standards, and other additions in the quoted cost. There’s also typically little to no price competition for the student rentals.
These costs are part of the reason that community colleges are often less expensive (they often don’t have dorms). Let’s have a hard look at five primary reasons why college dorms are so expensive. We’ll also draw quick parallels with living off-campus in case you’re weighing both options.
5 Reasons Why College Dorms Are So Expensive
Dorm costs have risen 111% in the last 30 years. In contrast, average apartment rental costs have only risen 24% in that time. So it makes sense that college students might want to live off-campus (source).
Below are five reasons why college dorms are that expensive.
1. Intra-College Competition for Students
Colleges are constantly competing for students from similar pools. Therefore, they have to make their dorms nicer or at least on par with their competition.
Students want similar suburban comforts they’re used to in these dorms, so they’re likely to choose a college with a dorm that doesn’t look 100 years old while including amenities like air conditioning, Wi-Fi, heating, and other items.
Colleges with dorms that don’t have these amenities will install them and raise prices to cover the costs.
They aren’t just competing with other institutions for the best students, but they also want to attract high-net-worth parents. These parents are unlikely to allow their ward to live in what they may describe as decrepit conditions, and they won’t hesitate to take their money elsewhere.
The percentage of admitted students who choose the school (yield rate) is an important metric that affects a college in many ways. It’ll affect their ranking and even influence the interest they’re charged on bonds.
Therefore, colleges go above and beyond to make sure their dorms don’t negatively influence their yield rate. The result, however, is that students pay higher dorm fees (source).
2. Rising Inflation
With inflation biting deep into the U.S. economy, consumers now have to pay higher prices on so many things, including college dorm prices. If dorm administrators pay exorbitant fees for new constructions or facility installations, that cost gets passed on to the students and their parents.
3. Cost of Included Utilities
As mentioned above, most college dorms are fitted to provide students with the type of life they were probably used to before moving to college.
Apart from amenities like Wi-Fi and air conditioning, dorms also take care of plumbing, electricity, housekeeping, general maintenance, laundry, and more. The costs of these provisions are added to the total fee to come up with the final cost of the dorm for a specific year.
Most of them don’t allow students to cook their meals, so they also include a meal plan in the costs. These plans can cost as much as an extra $2,000 for the lowest possible plans. With utilities and meals added, the overall cost of living in the dorm invariably increases significantly.
4. Lack of Competition
Real estate in colleges is in high demand as students want to live as close to the office buildings or classrooms as possible.
However, only the college and their approved partners can build properties in nearby areas. The result is that they get to charge whatever they feel is an appropriate rate for the dorm. More properties owned by members of the public nearby will force them to review prices and keep them competitive.
It also doesn’t help that most colleges make it compulsory for freshmen to live in colleges in that first year. They know if you accept the admission, you’re likely to pay any dorm fees quoted.
5. Profit Drives
If you believe the schools aren’t there for profits, you need to rethink that stance. Some students have noted paying tuition fees that are lower than what they were quoted for a dorm.
Colleges use the higher dorm fees to recoup any amount “lost” to grants and scholarships.
The profit drive is also why college dorms located in areas with little or no nearby affordable housing for students charge slightly higher compared to areas with more competition. The administrators know you’d have to spend 20-40 minutes on the daily commute and spend hundreds of dollars in transportation costs, for example.
So, they offer the dorms as a solution while cutting into the money you’d have spent on transportation.
Living Off-Campus vs. College Dorms
With the high fees quoted by college dorms around the country, living off-campus might sound like a wise decision on paper. Is that always the case in reality? No.
Off-campus living puts some of the responsibilities of adult living back in your court as an individual. For example, if your dorm cost is all-inclusive of all the amenities and utilities we’ve covered above and it costs $700 per month, you may end up spending more than that sum on a $450 apartment off-campus.
Remember, you’d have to include the cost of commuting (both time and money), cost of utilities, laundry, snow plowing, plumbing, cleaning supplies, and your meals. You’d have more freedom and better control over your daily life in an off-campus apartment, but if you’re looking to save money, it’s not always black and white.
Take your time to analyze the hidden costs of off-campus living against the cost of paying for college dorm accommodation before you decide.
College dorms are so expensive because the administrators have to make them as comfortable as possible while also generating income from the residences.
They also have little competition on prices, so they can charge whatever they believe is fair value.
If you’re not under compulsion to live in a dorm, you should consider living off-campus. Sharing an apartment with one or two other students can significantly lower your living costs. However, be sure to crunch the numbers to ensure it all checks out.