Oct. 20 (Bloomberg) -- Tuition and fees at private four- year colleges in the U.S. rose the most in 21 years, when adjusted for inflation.

Prices rose by an average of 4.4 percent at private four- year colleges in the U.S., to $26,273 for the 2009-2010 school year, compared with 5.9 percent the previous year, according to a report released today by the New York-based College Board. Using inflation-adjusted numbers, this year’s increase was 6.6 percent, the largest since 1988-89, when it was 9.1 percent. That year, tuition and fees were $14,546, in inflation-adjusted dollars, the report said.

Tuition increases, set earlier in the year, exceeded inflation as endowments declined in value and public colleges reduced budgets because of state funding cuts, said Sandy Baum, an economist and senior policy adviser at the College Board.

“Certainly there hasn’t been enough movement in finding really innovative ways of doing things,” Baum said. “That’s what they’re going to have to do to turn this around. This is not something they can do in a few months.”

‘Not Like Companies’

Schools also increased their financial aid budgets and haven’t required professors to add more to their teaching load, which compounded their difficulties, she said.

“Universities are not run like companies,” said Peter Morici, a professor of business at the University of Maryland in College Park, Maryland. “Just like health care, universities could use a lot of tightening up. Unfortunately, there isn’t that kind of focus to get that done.”

The consumer price index, the main gauge of inflation in the U.S., showed an average annualized 1.7 percent gain in the 12 months through June 30, according to Labor Department data. Consumer prices are falling this year, touching a 2.1 percent rate of decline in the 12 months through July, the worst bout of deflation since early 1950.

The cost of four-year state colleges grew by an average of 6.5 percent for in-state residents to $7,020, according to the College Board, a nonprofit institution that owns the SAT or Scholastic Aptitude Test, used to determine college admissions. Adjusted for inflation, the increase was 8.8 percent, the most since 2003-04 when the cost rose 11 percent, College Board said.

Appropriations, Endowments

When state appropriations go down, tuitions at state schools are increased to make up the difference in revenue, Baum said. U.S. endowments fell by an average of 24 percent in the last six months of 2008, according to the Commonfund Institute in Wilton, Connecticut.

The College Board study looked at data from 2,958 schools, including 1,082 private schools and 585 public four-year colleges.

About one-third of full-time undergraduate students do not receive financial aid, according to the study.

To contact the reporter on this story: Janet Frankston Lorin in New York jlorin@bloomberg.net.

Last Updated: October 20, 2009 15:52 EDT