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Two strange things are happening right now.
Politicians, pundits, and the public are swept up in a panic about the price of college. News articles describe higher education costs as — pick your evocative verb — “spiraling,” “skyrocketing,” and “soaring.” The Trump administration wants schools to lower tuition. More and more top colleges say it will cost over $100,000 a year to attend. Surveys show that cost concerns are a key driver of Americans’ disillusionment with higher education.
At the same time, the actual price of undergraduate tuition has been going down for years. While elite schools with high sticker prices draw the most attention, average net tuition for an in-state public university runs about $2,500 a year, a figure that has declined of late. Two-year college tuition is often free. “People think college costs more than it actually does,” says Wellesley economist Phillip Levine.
This remarkable reality has been widely underappreciated. So why have tuition rates fallen? And why does no one seem to realize this?
Sticker price vs. actual price
Levine became interested in college costs while planning for his own children’s education. He wanted to know how much he should save, but this was difficult to figure out since it was not clear what he should expect to pay.
His dilemma reflects the confusing college cost system: There’s the list price, which anyone can look up. Then there’s the actual price that people pay once various scholarships and discounts are applied. These two figures have increasingly diverged.
While sticker prices have gone up over the last two decades, adjusted for inflation, the average net price has trended down at both public and private colleges, according to detailed data produced by the College Board. These days, the typical family pays a fraction of the advertised tuition, though this varies by school.
(A brief definitional note: I’m focusing on tuition and academic fees. I’m not including room and board because those costs, while real, are not unique to college students; everyone has to pay for food and housing. Also note that the public college tuition figure only applies to in-state residents. Out-of-state students typically pay much more.)
Opaque pricing allows schools to charge different students different amounts — often for good reason. Students from lower-income families usually pay less because they receive need-based aid. In recent years, those students have seen particularly steep drops in tuition.
At many elite, high-priced colleges, the only families who are paying the sticker price are those who can reasonably afford it (which incidentally is a lot of them). Low and moderate-income families often pay little or nothing in tuition.
The growing disconnect between sticker prices and real tuition costs is probably not just about more aid to needy students, though. Colleges are also increasingly competing for other students by giving steep discounts in the form of merit scholarships.
There’s a serious downside to this pricing strategy: It’s hard to know the real cost of college. This creates a headache for families trying to plan and a public relations problem for higher education.
Motivated by this issue, Levine launched a nonprofit to make prices more transparent from the beginning of the college admissions process. “When I got frustrated with that in my own experience, I started thinking about other ways that I could make it easier for people,” Levine says. The College Board acquired his nonprofit earlier this year.
These and other efforts may have helped some families better understand costs, but the broader public remains fixated on the high, rising, and much-publicized sticker prices, particularly at elite private colleges.
The vast majority of undergraduates — about 3 in 4 — go to a public college, but so much media attention focuses on Ivy League universities. For some, these schools have come to represent “higher education,” even though they educate a tiny fraction of college students. This has made it difficult to change public perception. While a number of experts have written earnest think tank reports seeking to explain the reality of college prices, these efforts have barely dented conventional wisdom.
The (potential) causes of lower tuition
So what explains the recent dip in college tuition? A few theories include:
- More awareness about the risks of loan debt has made students more price conscious.
- The flattening and recent decline of the college-wage advantage has weakened demand for college, leading schools to reduce costs in a bid to attract students.
- The price of highly educated labor — a key driver of college costs — has stopped rising.
- States have increased funding for public colleges, allowing them to rely less on tuition.
- External grants and scholarship opportunities may have grown.
Levine thinks the biggest factor has been supply and demand. “Colleges exist in markets, and there are market pressures, and the market pressures went in the direction of: They needed to lower prices,” he says.
To be clear, plenty of families still struggle with higher education costs. Many students take on loans to pay for living expenses above and beyond tuition. Relatively advantaged families who do have to pay the sticker price, or close to it, are stretched thin. Some students drop out without a degree and then have a hard time paying back even modest loans. Others rack up debt in for-profit trade schools that don’t lead to decent jobs. Some students return to graduate school (where prices have been rising) and take out much larger loans.
What’s also true is that after years of public clamoring for colleges and policymakers to reduce college tuition costs, many have done precisely that. If advocates for higher education want to regain public trust, they might start with better publicizing this fact.
Matt Barnum is Chalkbeat’s ideas editor. Reach him at mbarnum@chalkbeat.org.
