Judith Scott-Clayton is an assistant professor at Teachers College, Columbia University.
The College Board released its annual report on the cost of college last week, and guess what? It’s going up. Again. Cue the headlines: “College Costs Reach New Highs”; “Public College Costs Surge 8.3 Percent”; “College Tuition Is Out of Control.”
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What has been buried in much of the resulting coverage is that while colleges’ published tuition and fees have indeed increased, these so-called “sticker prices” are not all that informative. For the average full-time student, net tuition – which subtracts grants and tax-based aid – is less than half of the published price at private nonprofit four-year schools and less than a third of the published price at the typical public four-year institution.
Moreover, trends in sticker prices and net prices have diverged over the past several years, such that many students are actually paying less now to attend college than they would have five years ago.
The College Board
This divergence is the result of a 40 percent increase in grant aid and a 78 percent increase in tax-based aid since 2005-6. The average full-time undergraduate now receives about $6,500 annually in grant aid and nearly $1,000 in tax-based aid to help defray tuition and fees (these figures, also from the College Board, are averaged across all students, including those who received no aid). Only about one-third of full-time students pay the published sticker price, and even this third may receive significant tuition tax credits that lower the effective cost.
After accounting for this assistance, net tuition and fees in the public four-year sector, at $2,490, are only $170 higher today (in constant 2011 dollars) than they were five years ago. At private nonprofit four-year institutions, net prices are $500 lower than they were five years ago. And at community colleges, the average student actually faces a negative net price – meaning they receive about $800 more in aid than they are charged in tuition and fees.
This growing gap between sticker prices and net prices is not a bad thing; it enables colleges (or states) to price discriminate. Because tuition at most public and nonprofit institutions fails to cover per-student expenditures, keeping published prices low would mean providing a blanket subsidy to all students regardless of need.
The trade-off, however, is increased complexity, and often total confusion. Many students and their families consider only published prices when comparing colleges, without taking financial aid into account.
And families’ perceptions of sticker prices are themselves often wildly inflated, perhaps in part because of news coverage that tends to focus on prices at elite four-year institutions, like Columbia University (with published tuition and fees exceeding $45,000) rather than the public two- and four-year institutions that most students attend. Participants in one recent study, for example, overestimated the published tuition costs of community college by more than 300 percent.
This confusion is one reason why colleges are now required, as of Oct. 29, to offer “net price calculators” on their Web sites. Having explored a handful, I have found quite a bit of variation in both the amount of information students are required to input and the resulting output.
Many calculators, like one used by the University of Florida, require the user to page through multiple screens, inputting detailed information that most casual explorers will not have on hand (e.g., what year the eldest parent was born, what type of tax form was filed, how much income was earned from interest and dividends). But the resulting output is similarly precise, providing information on specific types of federal, state, and institutional aid.
Others, like one used by Southwestern Oklahoma State University, require the student to answer just nine basic questions, but provide only a single number for “estimated grant aid” that does not, for example, take account of students’ eligibility for state merit-based grants.
Unfortunately, some of these calculators are likely to increase families’ confusion. For example, the output of the calculator of the University of California, Los Angeles, (for a single-parent family with $30,000 in parental earnings, $2,500 in parental assets, $2,500 in student earnings and $500 in student assets) included a “self-help award” of $9,200 – which sounds great until you read the fine print, which clarifies that this type of “award” means loans and work-study, not grants.
Finally, another story that is often missed in discussions about college costs is that for most students, the main cost of college is not tuition and fees, but the opportunity cost of time – that is, if one were not in college, what productive activity could one be doing instead? For example, while community college students may receive on average $800 more in aid than they pay in tuition and fees, this $800 is not going to cover all of the earnings forgone if the individual enrolls full time in school.
Unless, of course, that individual is already unemployed. Given current economic conditions, the opportunity cost of enrolling in college is lower than it has been in a long time. Granted, this is hard to get excited about. But the declining opportunity cost of college is one big reason that college enrollment rates have reached all-time highs in the last few years, even while published tuition prices have been rising.
Article source: http://feeds.nytimes.com/click.phdo?i=c6a7726398493b3e54401ac9291fb2e8
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