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Trusteeship Magazine

Making Sense of Tuition Prices and College Costs

July/August
2011
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Several recent studies have shed light on the increasing cost and price of higher education, examining different facets and perspectives: trends in state and local government appropriations, student tuition and fees, borrowing, and debt. Together, they help boards understand the complex relationship between tuition and fees, institutional financial aid, state support for higher education, published price (sticker price), and average price paid (net price).

Congress and the U.S. Department of Education have mandated that starting in October 2011, each college and university whose students are eligible for federal financial aid will provide a "net price calculator" on its Web site that will be linked to the U.S. Department of Education's College Navigator Web site. College Navigator is a resource for prospective students and their families to identify colleges and universities that may be of interest. This new tool will allow them to estimate and compare the price of attending, given a student's academic and financial background. The net price calculator will be of particular benefit to low-income students, who will have a better idea of the net tuition price and may consider applying to institutions they could not otherwise afford. Policies about tuition and financial aid will now be more transparent and will likely demand more attention from boards.

The facts and figures about tuition prices and college costs in several reports have been very helpful in separating myths from reality and in answering questions about how much college costs in America, why, and who pays for it. I've described some of these resources below. Most are available online for free.

Trends in State Support

"State Higher Education Finance FY 2010," published this year by the State Higher Education Executive Officers (SHEEO, 2011) with support from the College Board, reports trends in state funding for higher education, the proportions of revenue from tuition and state and local support, and enrollment. It helps answer questions about total state and local spending on public higher education per full-time-equivalent student compared to the proportion paid by students through tuition and fees.

It has been clear for many years that, as states cut support to higher education, the amount paid in student tuition and fees has increased. Figure 1 shows that enrollment in public higher education (the red line) has continued to grow, rising from less than 8 million FTE students in 1985 to nearly 12 million in 2010. Also in 2010, the educational appropriation (in constant dollars) per student (in blue) was as its lowest point, at $6,451, while net tuition revenue per student (in green) was at its highest, at $4,321. Total state spending per student declined in 2010 and was lower in only three (2003–06) of the last 14 years. As enrollment has increased, public colleges and universities have done more with less state funding (per FTE), and costs have shifted to students.

Typical Price Paid

According to "Trends in College Pricing 2010," published by the College Board, tuition and fees for both public and independent colleges and universities have increased over time. Yet the average net price that students and their families paid declined in 2010–11 after adjusting for inflation and considering grant aid and tax benefits, in part due to increases in Pell grants. (See Figure 2).

While public perceptions seem to be focused on the sticker price of the most expensive and selective colleges, the average published tuition and fees for a four-year independent college in 2010–11 was $27,290, and the average net price paid was $11,320. At public four-year colleges and universities, average published in-state tuition was $7,610, and the average net price paid was $1,540. (Room and board were an additional $9,700 at independent colleges and room and an additional $8,540 at public institutions). There were considerable variations by geographic region and type of institution, but overall, half of students attending a four-year college full-time in America in 2010–11 were enrolled at an institution with a sticker price for tuition and fees under $9,418.

Guidance for Boards

Information about price is confusing. The average sticker price continues to increase, but not the average net price—at least after adjusting for inflation. How does that play out at each institution?

Boards may find that information about national trends will contribute to better strategic choices about institutional aid and tuition charges.

"Tuition and Financial Aid: Nine Points for Boards to Consider in Keeping College Afforable" by Sandy Baum (AGB, 2011) puts trend data in perspective and explains gross and net revenue, sticker and net price, and merit and need-based aid. Policies about need-based aid and merit aid have far-reaching implications for shaping the student body and should reflect institutional values.

In a recent Trusteeship article,"What Is the Net Price Calculator? Why Do Boards Need to Know About It" (May/June 2011), Lucie Lapovsky examined the implications of tuition discounting policies and the data boards need to evaluate the options. Complying with the new net price calculator requirement may afford boards an opportunity to learn more about their current aid policies and take a fresh look at tuition. You should know what prospective students will see online.

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