Introduction

Between 2013-14 and 2014-15, the percentage increases in published tuition and fees in all sectors were lower than the average annual increases in the past five years, the past 10 years, and the past 30 years. College price increases are not accelerating. But they are accumulating. Tuition and fees have been rising in real terms for decades. The inflation-adjusted average published price for in-state students at public four-year universities is 42% higher than it was 10 years ago and more than twice as high as it was 20 years ago. In the private nonprofit four-year sector, the increases were 24% over 10 years and 66% over 20 years.

With the price of college rising faster than the prices of most other goods and services, despite the high financial payoff to college, people perceive  themselves as giving up increasing amounts of other things to pay for college. Even more important is the reality that real incomes have not increased for more than a decade, except at the top of the income scale. Much of the growth in the earnings gap between college graduates and high school graduates has been the result of declining wages at the lower end of the distribution, as opposed to increases for those with a college education.

Assuring that our nation continues to provide postsecondary education to all who are motivated and can benefit is a prerequisite for both a healthy economy and a society that provides meaningful paths to rewarding and independent lives for all individuals. While published college prices can be misleading because most students receive financial aid that reduces the amount they actually have to pay, these prices provide an important indication of social priorities, of opportunities, and of the struggles facing many students and families as they plan their futures.

Trends in College Pricing 2014reports on the published prices in 2014-15 and in previous years. We also incorporate the latest data reported in Trends in Student Aid 2014in calculating the net prices students and families pay after taking financial aid into consideration. The information in this report provides the basis for a better understanding of college financing and for the analysis of policy options designed to reduce the barriers to a more educated population.

Published Prices for One Year of Full-Time Study

The prices reported in Trends in College Pricingare for one year of full-time study. Many students enroll part time, and prorating these prices does not always give an accurate picture of the published prices students face, much less of the net prices generated by the grant assistance and tax benefits  provided by federal and state governments, colleges and universities, and employers and other private sources.

But even for full-time students, one-year prices at “two-year” and “four-year” institutions may not be adequate indicators of the cost to students of pursuing postsecondary certificates and degrees. Among students who began their studies full time at a four-year institution in 2005, 39% had completed bachelor’s degrees at their first institution after four years and 59% had completed after six years. In other words, about one-third of bachelor’s degree recipients took longer than four years to complete their degrees. Not all of these students paid more than four years of full-time tuition — they may have taken time off or enrolled part time for at least a semester. But for many of those who took longer than four years to earn their degrees, tuition and fees (before accounting for grant aid) were likely to be considerably more than four times the one-year price.

Taking more than two years to earn an associate degree or more than four years to earn a bachelor’s degree has financial implications beyond tuition and fee expenses. Forgone earnings from reduced participation in the labor force constitute the largest portion of the cost of college for most students. The more quickly students earn their degrees, the more time they have to earn college-level wages and reap the financial benefits of postsecondary education. Bachelor’s degree recipients between the ages of 25 and 34, for example, had median earnings 71% ($17,614) higher than those with high school diplomas in 2013 (U.S. Census Bureau, 2013 Income Data, Table PINC-03).

Past and Future

As Figure 5 illustrates, the rate of growth of published tuition and fees is not accelerating over time. In both the public and private nonprofit four-year sectors, the inflation-adjusted increase in prices was smaller between 2004-05 and 2014-15 than over the previous decade, and the increase between 2009-10 and 2014-15 was smaller than the increase over the previous five years.

But Figure 6 shows how the price increases accumulate over time. The average published tuition and fee price in the public four-year sector is 3.25 times its level of 30 years ago, after adjusting for inflation. In the public two-year and private nonprofit four-year sectors, the prices are about 2.5 times their 1984-85 levels. Institutional expenditures tell only a small part of the story behind these rising prices. As Figure 19B reveals, outside of private doctoral universities, per-student educational expenditures have not risen rapidly over the past decade. They have declined by 7% in the public two-year sector — where tuition and fees increased by 28% in constant dollars between 2004-05 and 2014-15. As in other sectors, net tuition revenues in the public two-year sector constitute a growing share of the budget. For public institutions, declining state revenues per student are a major factor behind this trend. State funding for higher education is cyclical (Figure 16A), but there is also a long-term downward trend in this subsidy to postsecondary students.

Published and Net Prices

Although it is generally the published prices that make headlines, the net prices paid by individual students are what matter the most for college access and affordability. We estimate that in 2014-15, while the average published in-state tuition and fee price at public four-year institutions is $9,139, the average net price is about $3,030. Grants and tax credits and deductions cover the remainder for the average full-time student.

As Figures 11, 12, and 13 indicate, the difference between the published tuition and fee prices and the average net prices that students pay has grown over time as grant aid and education tax benefits have come to play a larger role. In particular, from 2008-09 to 2010-11, the federal government markedly increased its funding for students, causing average net prices for students to decrease in years when tuition was rising rapidly. Private nonprofit colleges continue to increase their institutional grant aid, but for public four-year college students, the $800 increase in published tuition and fees (in 2014 dollars) between 2010-11 and 2014-15 was not met by an increase in grant aid per student.

These averages across sectors conceal considerable variation among students. As Figure 14 reveals, in 2011-12, full-time in-state students at public four-year institutions from families with incomes below $30,000 received enough grant aid from all sources combined to cover tuition and fees and have about $2,300 left to put toward room, board, and other expenses. Average aid covered tuition and fees for dependent students from families with incomes below $65,000, as well as for independent students at public two-year colleges. Despite the reality that, as documented in Trends in Student Aid 2014, significant amounts of student aid are allocated on the basis of factors other than financial need, net prices are positively correlated with family incomes.

Tuition and Fees Versus Total Charges

In addition to tuition and fees, we report room and board charges for residential students, living costs for commuter students, and other components of student budgets. Whether students live on campus or off campus, they must pay for housing and food, buy books and supplies, and cover transportation and other basic living costs.

Many of these expenses are not really part of the cost of attending college, but are expenses people face whether or not they are in school. The largest real college cost many students face is forgone earnings. It is very difficult to succeed in college while working full time. However, the cost of students’ time is difficult to measure, and we make no attempt to do so in this report. Because students tend to think of living expenses as part of the cost of going to college, and because they must come up with the funds to cover these outlays, it is useful to use these expenses as a proxy for forgone earnings.

The cost of living poses a significant hurdle for many students. Even those who receive grant aid sufficient to cover tuition and fee charges may struggle to cover living expenses. It is not so much the prices charged by institutions, but the very real costs students incur by devoting their time to school and forgoing the income needed to support themselves and their families while in school that create the burden for these students.

College Affordability

Understanding the difficulties many students and families face in covering postsecondary education expenses is not possible without taking trends in the level and distribution of incomes into consideration. As documented in Figure 22A, incomes have declined over the past decade for families at all but the top of the income distribution. Economic inequality in the United States has been growing over recent decades. For example, the share of all income going to the 20% of families with the lowest incomes declined from 4.9% in 1983 to 3.8% in 2013, while the share going to the top 5% of families rose from 15.3% to 21.2%.

Current income is not the only benchmark for college affordability, since students also borrow against their future incomes to help finance their education. Understanding reasonable debt levels must be part of the discussion of college prices and how students and families pay those prices.

In addition to the very different circumstances facing students from different backgrounds and of different ages, there is considerable variation in prices across sectors and across states and regions, as well as among institutions within these categories. College students in the United States have a wide variety of educational institutions from which to choose, with many different price tags and with different levels of financial aid. One of the problems many students face is how to make sense of all the options and complex pricing structures.

Postsecondary education is an investment that pays off well for most people. The investment also pays off for society as a whole, with individual students reaping only a portion of the benefits of their education. The information on college prices, enrollments, and revenue and expenditure patterns reported in Trends in College Pricing 2014 is best understood in combination with information on student aid reported in Trends in Student Aid 2014and the  information on the returns to education included in the College Board’s publications, Education Pays 2013and How College Shapes Lives.

Interpreting the Data

Measuring Tuition

A growing number of institutions charge different prices for different years of study and/or for different academic majors. We are able to incorporate some, but not all, of these differences in our price estimates. Another complexity is that some two-year colleges are offering a small number of four-year degrees or providing course work that leads to four-year degrees awarded on other campuses. Although we make every effort to adjust our methodology to accommodate these changes, it is impossible to draw precise lines between sectors and to develop exact measures. Over time, as institutional pricing structures become increasingly complicated, the average prices we are able to report may be less representative of the experiences of individual students.

Trends in College Pricing 2014 presents detailed pricing data for public two-year and four-year colleges and private nonprofit four-year institutions. While we provide an estimate of the average charges at for-profit institutions, because of the relatively small sample of those institutions from which we are able to collect data and the complex pricing structures prevalent in this sector, it is important to interpret that information with caution. Fulltime equivalent undergraduate enrollment in the for-profit sector declined by about 24% between fall 2010 and fall 2013 (IPEDS preliminary data), while overall enrollment declined by 5%. Still, the experiences of the 1.1 million undergraduates in that sector are an important component of the postsecondary landscape.

Price Changes

While the information reported here provides a best approximation of trends in college charges over time, we caution readers about placing too much reliance on either precise dollar amounts or precise annual percentage changes. Each year we revise the average prices calculated the previous year to account for corrected data we receive from institutions and to provide an enrollment-weighted average based on the most recent available data on the number of full-time students attending each institution. If, over time, increasing numbers of students were to enroll in the lower-priced institutions within a sector, our measure of the average price increase would be lower than if enrollment were stable. Details relating to our methodology and to other technical issues and data reliability can be found at the end of the report in the Notes and Sources section.