Dive Brief:
- Sticker prices are an “increasingly poor” indicator of how much students actually pay for college, according to recent research from The Brookings Institution. Those prices are an easy metric to track but they’re only paid by a small share of students — and even that share has been declining.
- In 2019-20, 26% of in-state public college students paid the full sticker price, down from 53% in 1995-96, the analysis found. At private nonprofits, the portion dropped from 29% to 16% during the same period.
- These sticker costs obscure the true cost of higher education and hinder researchers’ grasp of what students pay. “Understanding how much lower- and middle-income students pay is particularly important if we are seeking to improve college access,” said Phillip Levine, nonresident senior fellow at Brookings who conducted the analysis.
Dive Insight:
A college’s net price refers to what a student pays after financial aid is subtracted from the published tuition and fees — the so-called sticker price.
Lower-income students — defined as those whose families earn under an inflation-adjusted $50,000 — who attended public four-year colleges in 1995-96 paid an average net price of $12,500. By 2019-20, that amount rose to $18,000. At four-year private nonprofits, the net price for lower-income students rose from about $20,000 to $25,000 during the same period.
For this group, the net price of college increased 44% at public institutions and 24% at private nonprofits over the two-and-a-half decade span. While these are significant increases, they are eclipsed by the roughly 70% rise in sticker prices across both types of institutions in that time frame.
Levine tracked changes using data from the National Postsecondary Student Aid Study, and all figures have been adjusted for inflation to represent 2023 prices.
While college is expensive for all students, affordability poses a greater challenge for low- and middle-income families than high-income ones. Students from the former group wouldn’t attend college if they can’t pay for it, the report said.
“Our current system of setting and communicating college prices simply does not work,” Levine said. “We cannot expect students to make sound decisions regarding educational investments if they do not understand how much college will actually cost them.”
For example, despite rising sticker prices, the net price of attending a private nonprofit for lower- and middle-income students has remained roughly the same since the 2007-08 academic year.
Still, private nonprofits are not automatically accessible simply because their net costs are no longer outpacing inflation.
“One should not interpret this finding as indicating private colleges are becoming more affordable for low- and middle-income students,” Levine said. “Private institutions are clearly more expensive than public institutions, as one might expect.”
However, students spend as much to attend public colleges now as they would have at private institutions in the mid-1990s, the analysis found.
Student aid is typically awarded based on demonstrated need or merit. And it is common for colleges to increase both their sticker prices and financial aid packages.
Need-based funds are calculated and capped using applicant data from the Free Application for Federal Student Aid. Merit aid, on the other hand, is awarded at a college’s discretion, and students with stronger academic records typically receive more.
Many colleges give merit aid to a large share or even all their students.
“Universal merit aid has the same impact as reducing the sticker price,” Levine said. “Colleges choose to offer it for marketing purposes, setting a high sticker price to signal institutional quality while awarding ‘merit aid’ to signal support for admitted students.”
But colleges will often substitute merit-based aid for need-based aid, at least in part, for students who are eligible for both, researchers found. This results in merit aid packages largely benefitting higher-income students — the ones more likely to pay colleges’ sticker price.
#Sticker #prices #increasingly #fail #capture #college #costs #research #finds
