College prices are in the spotlight as concerns about college affordability gain momentum. Questions about how much students borrow for education, about access for low-income students, about how middle-income and even more affluent families can finance college, and about the role of postsecondary education in contributing to or ameliorating inequality abound.
Trends in College Pricing 2015 clarifies both the dramatic rise in the price of college relative to other goods and services over time and the reality that this is not a new story. The rate of increase in tuition and fees has actually slowed over time. But in an era where some postsecondary education is a prerequisite for most types of employment that can support a middle-class lifestyle and where family incomes have been stagnant or declining for years, rising prices create more barriers.
Moreover, during the Great Recession, the federal government stepped up to significantly increase student aid, widening the gap between published prices and the net prices students and families actually pay for college. On average, after subtracting grant aid and tax benefits, students paid less in tuition and fees in 2010-11 than they had five years earlier. But while this funding is still available, and colleges and universities have continued to increase the institutional grant aid they offer, net prices have grown as the economy has started to recover. At the same time, as Figure 22A shows dramatically, income inequality has increased and average incomes have been stagnant or declining across the income spectrum.
Finding solutions requires a clear understanding of the issues. Trends in College Pricing 2015 reports on price increases in recent years that are moderate by historical standards, but persistent. It includes information on the context of challenging circumstances for students and families; on the failure of state funding to keep up with growing enrollments, a key factor in pushing tuition up; on the relatively slow recent growth in expenditures at most types of institutions; and on the reality that net tuition prices are much lower than published prices, particularly for lower-income students. The companion publication, Trends in Student Aid 2015, focuses on the funds available to help students pay the price of college, and this year, particularly on where problems with student debt really lie and where there may be misperceptions. The information in these reports should strengthen our ability to develop constructive policy approaches to increasing educational opportunity, rather than focusing on broad ideas that may have political appeal but miss the roots of the challenges we face.
Published Prices for One Year of Full-Time Study
The prices reported in Trends in College Pricing are 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 2007, about 40% had completed bachelor’s degrees at their first institution after four years and about 60% had completed their degrees after six years (NCES, Digest of Education Statistics 2014, Table 326.10). In other words, among students who earned bachelor’s degrees within six years, one-third took more than four years to do so. 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 had median earnings 66% ($17,636) higher than those with high school diplomas in 2014 (U.S. Census Bureau, 2014 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 2005-06 and 2015-16 than over either of the two previous decades. The increase between 2010-11 and 2015-16 was smaller than the increase over the previous five years. But Figure 6 shows how the price increases accumulate over time. After adjusting for inflation, the average published tuition and fee price in the public four-year sector is 3.22 times its level of 30 years ago. In the public two-year and private nonprofit four-year sectors, the prices are about 2.4 times their 1985-86 levels.
Institutional expenditures tell only a small part of the story behind these rising prices. As Figure 19A reveals, outside of private doctoral universities, per-student educational expenditures have not risen rapidly over the past decade. They have increased by only 2% in the public two-year sector — where tuition and fees increased by 29% in constant dollars between 2005-06 and 2015-16. 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 2015-16, while the average published in-state tuition and fee price at public four-year institutions is $9,410, the average net price is about $3,980. 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 $1,060 increase (in 2015 dollars) in published tuition and fees between 2010-11 and 2015-16 was not met by an increase in grant aid per student. Net price is rising rapidly for students in this sector.
These averages across sectors conceal considerable variation among students. As Figures 14 and 15 reveal, in 2011-12, grant aid covered tuition and fees for many students and very few paid net prices resembling the published tuition and fee levels reported in Trends. Despite the reality that some student aid is 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, buybooks 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 that 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 is about more than just college prices. It is about economic inequality, about income levels for the majority of families and individuals, about the prices of other goods and services, and about personal and societal priorities. Again, the changes in the level and distribution of family incomes illustrated in Figure 22A are critical to the story of educational opportunity. Similarly, the information about state funding of public higher education reported in Figures 16A, 16B, 17A, and 17B — combined with the details on financial aid included in Trends in Student Aid 2015 — provides insight into what society as a whole is doing and is not doing to share the responsibility for financing postsecondary education.
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 issues many students face is how to make sense of all the options and complex pricing structures.
Interpreting the Data
Average tuition and fees by sector becomes a less and less precise measure over time. A growing number of institutions charge different prices for different years of study and/or for different academic majors. In other words, many students on a campus may face published prices quite different from those reported by institutions in the College Board’s Annual Survey of Colleges.
Even more fundamental, the lines between sectors are increasingly blurry. Two-year colleges in a number of states offer some four-year degrees. The National Center for Education Statistics, on whom we rely for much of the data included in the Trends reports, categorizes institutions as four-year if they award any bachelor’s degrees. The data make it possible, however, to draw the line between schools that are predominantly four-year with more than half of the degrees granted as four-year degrees or higher, and others. In Trends in College Pricing 2015, we have switched to this definition wherever possible. This change does not affect our estimates of published prices, which have always drawn lines based on the predominant type of degree awarded. But we have revised our enrollment analyses and our analysis of the distribution of financial aid by sector in Trends in Student Aid to be more consistent with “predominant” categorization.
Trends in College Pricing 2015 presents detailed pricing data for public two-year and four-year colleges and private nonprofit four-year institutions. Although 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.
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 revised 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.
The tables supporting all of the graphs in the Trends publications, PDF versions of the publications, PowerPoint files containing individual slides for all of the graphs, and other detailed data on student aid and college pricing are available at trends.collegeboard.org. Please feel free to cite or reproduce the data in Trends for noncommercial purposes with proper attribution.