US College Is Getting Less Unaffordable (but don’t tell anybody!)
The reputation of American higher education is in free fall these days. Over the past decade, the percentage of people expressing a “great deal” of confidence in higher ed has plummeted from 57% to 36%.
Are ever-rising college costs slowly sunsetting?
There are a lot of things people think are wrong American higher ed these days, and there is work to do on multiple fronts, but if there is one thing people “know” about colleges and universities, it is that they cost too much. Listen to most national figures (and many parents, and many students) talk about higher ed and you‘ll hear complaints about runaway tuition increases and staggering student debt, administrators jacking up costs year-after-year, daring the public to question them.
It’s a compelling story. And it’s at least five years out of date. I spent some time this week reading through the latest report from the College Board on what Americans actually pay to go to American colleges.
It turns out there has been a quiet discount revolution going on inside America’s colleges and universities … that they forgot to tell anyone about.
The College Board looks at what they call “average net price” -- the amount the average person is actually paying to attend college, adjusted for inflation. And if you are a student or a parent, it’s the actual cost that you care about. Let’s go through what the report finds. I’ll do it as an imagined conversation:
Higher and higher and higher. The cost of tuition and fees goes up every year way, way more than my paycheck goes up. Something’s gotta give.
Yep. That was true for a long time – from 1980 through 2020 or so. Then… it stopped. The cost students pay for tuition and fees has been going up less than the rate of inflation for the past 5 years. At public four-year colleges, in real dollars, in-state students are paying 26.2% less than they were five years ago; at private nonprofit (most private colleges are nonprofits) four-years, students are paying 10% less. At public two-year colleges, after grants and scholarships, the average student has a tuition credit that is $100 higher than it was 5 years ago (both public two-year and four-year colleges have raised prices for out-of-state students during that time).
Okay, but once you take all the other costs into account, college costs are still going through the roof.
Nope. The all-in cost (tuition, fees, housing, food, books, supplies, transportation) has also declined over the past 5 years. Compared to inflation, public four-year institutions cost in-state students 10.4% less; private nonprofit four-years cost 8.1% less; public two-year institutions cost local students 9.1% less.
This is obviously fake news. I’ve seen the stories. There are some colleges where it costs almost $100,000 a year to go to school!
There are some colleges that are inching close to an advertised price of $100,000 a year. But there’s a huge difference between the “sticker price” of college – the advertised cost – and what people are actually paying.
In fact, 82% of those attending public four-year colleges and 87% of those attending private nonprofit colleges get some kind of aid.
Only families making $300,000 or more pay the full sticker price.
If almost everybody is paying less than the sticker price, why not just reduce the sticker price?
Good question. The only semi-good answer I’ve heard is that college prices are kind of like medical prices. If a few people with the highest incomes (or best coverage) pay the “full” cost, that enables most people to pay a lower cost. I guess maybe there’s some sort of weird snob appeal: maybe some places think if they set their prices higher, people will assume they deliver higher quality education.
I’ll bet costs are falling more in red states, where politicians are holding administratorsfeet to the fire, than in blue states.
The College Board analysis shows that tuition and fees at public colleges, where politicians can have the biggest impact, are coming down almost everywhere. At public four-year schools, costs are down relative to inflation in 45 out of 50 states over the past five years. The US average is 10% overall, with declines in Georgia of 21%, Florida 19%, Vermont 17% and New Hampshire 16%. For two-year colleges, costs are down in 49 of 50 states over the past five years: Delaware, Florida, Hawaii, New Hampshire’s costs have declined by 19%, followed by California and Idaho at 18%.
So who’ deserves credit for making colleges more affordable?
Actually, according to Adam Looney, a University of Utah economist, colleges are offering about 70% of the discounts students are getting. Federal Pell grants are helping some lower-income students. But increased investments by states are also a huge factor in reducing college costs: on average, states pay a little over $11,000 to support each full-time student at public universities. Peter Hans, President of the UNC System, noted in a January 30 speech to his governing board that the state of North Carolina has increased funding for the system by 32% over the past five years, twice the rate of inflation.
What about the federal government?
The federal government’s principal support for undergraduates comes in the form of Pell Grants, a maximum of $7395 given to 6 million of the poorest students. awarded to 6 million of the poorest students. That program is currently facing a $2.7 billion funding shortfall. As government “efficiency” efforts continue, it’s not clear that deficit will be funded. If the government follows through on cuts to “overhead” from federal grants, many graduate students, whose tuition is subsidized through those grants, will face cost increases.
After years of jacking up prices faster than inflation, why are colleges suddenly getting cost conscious?
It’s not really “sudden”: first the growth of college costs slowed, then for the past five years they started to trail inflation. There are at least three reasons.
1) political pressure: once people trained a spotlight on colleges, they appear to have gotten the message.
2) waning interest: as people started looking at higher sticker prices, they assumed they couldn’t get a discount and voted with their feet: the number of students attending college has declined by 4% over the past three years at public four-year schools and by 12% at two-year schools. Michael Itzkowitz, founder of HEA Group, a consulting firm, puts it this way: "The No. 1 deterrent for a student not to pursue a college degree is affordability — they simply think they can't afford the cost of a higher education."
3) bad demographics: the number of 18-year-olds in many states has already begun to decline; that decline will continue nationally for several more years. To keep enrollment up while the “supply” shrinks, colleges have to be more competitive on price
The balance in affordability is tipping toward students.
Put all that together and you can see colleges have huge incentives to make colleges more affordable. The public university system in my state, North Carolina, for example, has now gone eight (soon to be nine) years without raising tuition. As UNC system President Hans put it: “You simply cannot expect people who work hard putting food on their kitchen tables to support universities if they are priced like luxury goods.”
But college debt is still skyrocketing, isn’t it?!
College debt is still a huge problem in the US. But as a result of loan forgiveness programs and increased affordability, total student debt has declined by 13% over the past five years. And the lower costs over the past five years are setting the stage for a lower debtload for new students. According to the College Board, 50% of students now graduate with no debt. Of those who have debt, 53% have less than $20,000 in debt once they graduate.
This is all completely different from what I have been hearing. Why aren’t colleges talking about this?
You got me. College administrators are generally good readers. They should have seen studies showing that high-achieving, low-income students look at sticker prices, then decide not to apply, even if they would qualify for full scholarships. And colleges’ current communications strategy about their affordability is a miserable failure:
· A 2023 poll found that more than half of all adults in the US either think that universities charge everyone the same amount or charge low-income families more;
· Another poll this year found that even as costs have been consistently going down, 44% of people still think their state’s public school costs will go up next year.
Here’s an idea for college administrators fighting to stay open and relevant in tough times. Rather than acting like you are embarrassed about controlling costs, or assuming people are going to magically figure out your super secret discount code, start talking honestly about how much it is going to cost for an average person to go to your school. Let potential students and their parents know what you are doing to keep costs under control while keeping quality up. Share the data about the ROI they can expect if they “buy” your brand of higher ed. Say it loud on billboards and quietly on message boards. Get everybody at your institution some good information about costs that they can share with their friends.
And put some real money behind your promotional campaign – say 1% of what you spend on your football team each year.
If you start saying in public what you are doing in private, maybe a few more people will get it.
-Leslie
Notes:
Gallup Poll on confidence in US higher education: https://news.gallup.com/poll/646880/confidence-higher-education-closely-divided.aspx
College Board study on what Americans actually pay for college: https://research.collegeboard.org/media/pdf/Trends-in-College-Pricing-and-Student-Aid-2024-ADA.pdf
Declining college prices: https://www.theatlantic.com/ideas/archive/2025/02/college-cheaper-sticker-price/681742/
High “sticker prices” dissuade high-achieving, low-income students from applying to schools: https://www.nber.org/system/files/working_papers/w18586/w18586.pdf and https://www.cbsnews.com/news/is-college-worth-the-money-gallup-poll-2024/
Americans believe everyone pays the same for college – or that low-income families pay more: https://www.aau.edu/newsroom/public-opinion-survey/2023-survey-result-tuition-colleges-and-universities