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Tuesday, April 16, 2024

Eye-popping college costs vs. what students actually pay; research report looks at higher education comparisons

Brookings graph, from Department of Education data
Younger generations may be bypassing college due to its eye-popping costs, but research shows that few students pay the "listed" price. "Public discussions regarding rising college costs typically focus on the listed cost of attendance (COA), or 'sticker price.' High and rising college sticker prices are the subject of considerable attention, reports Phillip Levine for Brookings. But the sticker price isn't what families pay. "The average amount students actually pay (the 'net price') has recently stabilized and even fallen in the last few years."

Levine's research concluded that "sticker price is an increasingly poor indicator of college prices for all students, regardless of family income. . . . The growing use of merit-based aid at both public and private institutions accounts for this. At public institutions, the vast majority (79%) of those higher-income students paid the full sticker price in 1995-1996. That share dropped to 47% in 2019-2020."

While the net price for a student attending a public institution has risen, "This upward drift in net prices at public 4-year institutions indicates that they are becoming increasingly more expensive over time for students at all levels of the income distribution. The increase for higher-income families was larger in dollar terms but roughly similar in percentage terms," Levine writes. "That maximum net price is often lower than the sticker price because of the extensive use of merit awards." Net price at private institutions is "consistently higher than at public institutions."

While net prices have increased for all students across all income levels, those increases are smaller than the stated hikes in sticker prices. Levine reports, "Adjusted for inflation, net prices paid by students today at public institutions across the income distribution are similar to those they would have paid at private institutions in the mid-1990s."

Levine adds, "This analysis yields several implications for policy discussions regarding college pricing. First, the nearly universal focus on the sticker price in public discourse is detrimental to our understanding of college costs. It is the easiest measure to track, but it is a misleading statistic that a small and declining number of students pay. Even many higher-income families do not pay the full sticker price."

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