That is somewhat true. What is called student services has ballooned at some campuses beyond belief. The root of the problem is the competition between colleges to attract students. There is high demand for college but at the same time, a lot of colleges fighting for them. There is no end in sight for this trend honestly. Think of it a bit like an airplane or a cruise ship. They have invested a ton in the vehicle so they need to fill it to capacity to maximize return on investment (valid even for not-for-profit institutions btw).
Colleges compete on several fronts. Student services is one. The point is to attract students who fall in love with a particular college for the wrong reasons (aka not academic or financial ones). Students falling in love with a college tend to go there no matter the cost… Can’t entirely blame universities for stupidity there though. Especially true when it comes to elite or prestigious institutions. The thinking of going to the absolute best ranked university you can get admitted to is another myth carefully cultivated by the industry. Studies have proven that it’s actually mostly detrimental (30% less graduation rate in STEM to be exact) due to big pond effect but yet you hear it all the time from parents and teachers (“Why would your kid go to X when they could go to Y which is so much better ranked?”). But this pushes costs higher since students going to their top choices usually get very little in merit aid (since you don’t need to bribe them at all to go).
Position in the US News College Rankings is another major avenue of competition. You want to get good students to bump your rankings. That’s where merit-based scholarships come in. You essentially bribe students who could go to a higher ranked college to come to your college in exchange for a discount. And what you discount on one hand, you get back in other ways. The most obvious one is room and board since now many college force students to spend at least 2 years in college-owned housing with meal plans attached. At public universities, tuition is often state regulated to keep costs in check a bit. But room and board is totally uncontrolled… guess which rose by 3% annually in the last few years and which rose by 7-8% over the same period?
But back to merit scholarship to boost rankings, this is a cost for universities, so somebody else needs to pay it hence increased tuition across the board and/or increase in addon fees passed to the students (tech fees, general fees, student services fees, etc…) Those fees used to be included in the total tuition but some can now be excluded so yeah tuition is kept at inflation increased but everything else is not to make up for it.
Another reason for higher cost is simply labor costs. Universities have to provide ratio of student to professors for stats. Since many people equate lower ratio with better education (there is a correlation but not as much as you’d think past a certain ratio). That forces colleges to keep staffing high. And in some fields (engineering especially), this is a tough since those faculty could get quite high compensation in private sector otherwise and colleges have been forced to align their compensations.
The final part IMO is FAFSA. The use of EFC has been corrupted completely. The ludicrously high caps on need-based scholarships are well exemplified by l33tsauce’s car dealership analogy. If your EFC is $10k, your bottom line is gonna be the same. So why not go for the more expensive colleges? After all, you’re not paying more. And those same college can then overcharge you all they want. Need-based scholarships need a complete revamp. IMO the solution involves enforcing a much lower cap on this aid. Yes it may restrict choices to the more affordable institutions. But once you graduate and get your first job, nobody gives a damn where you went to college.
Anyway, there are many reasons behind rising costs and the resulting higher defaults on loans. But finaid and the promotion of the “college experience” certainly are a major part of the issue.