Increasing numbers of Americans are questioning the value of a college education, despite the wage advantage college graduates enjoy reaching a decades-long high. Many attribute this skepticism to the skyrocketing cost of college. The “sticker price” of college has nearly tripled over the past 40 years, adjusting for inflation. How many students can realistically afford $30,000 for a public four-year institution, let alone more than $80,000 for an elite private school?
However, it’s crucial to understand that only students from higher-income families pay the full sticker price. Most students receive financial aid and pay significantly less, with the amount they pay actually decreasing over time. Despite this, lower-income students at most institutions are still required to pay much more than they can afford, which is the core issue that needs to be addressed.
Misunderstanding College Pricing
College pricing is often misunderstood, partly because it is so complex. The most accessible information is the sticker price (officially labeled the “cost of attendance”), which includes tuition, fees, room and board, travel, books, and other expenses. The federal government mandates that institutions post this number. However, due to financial aid, only about 1 in 6 dependent students attending four-year institutions pay this full amount. It would be more accurate to call this the “maximum cost of attendance.”
The key question is, what do most students actually pay? The “net price” – the sticker price minus grant-based financial aid that doesn’t need to be repaid – varies widely. Unfortunately, no publicly available data effectively provides this information for different income levels over time.
Increasing Grant Aid
Since the 2006-07 school year, average grant aid per student has increased, partially offsetting the rising cost of college and maintaining a lower average net cost of attendance at U.S. public colleges and universities. In recent research, data from institutions partnering with MyinTuition Corp., a nonprofit providing quick estimates of college costs after financial aid, show interesting trends.
College Costs by Income Level
Focusing on 14 highly selective private institutions, data from 2015-16 onwards reveals that college costs differ dramatically by family income. For example, a family with an income of $40,000 today pays an average net price of $5,000, which includes expected loans and student employment. This is 23% lower than it was seven years ago, mainly due to lower loan and employment expectations, which have been eroded by inflation.
Some schools have also introduced policy changes to help lower costs. In 2019, Rice University’s Rice Investment policy began providing grants covering all costs for students from families earning under $75,000. Last year, Williams College replaced all loans and work-study funding with grants that do not need to be repaid.
Families with incomes of $75,000 and $125,000 also pay much less than the sticker price, averaging $17,200 and $32,600 respectively. These figures represent declines of 22% and 14% since 2015-16. At these institutions, only families with incomes above about $300,000 typically pay the full sticker price, which is relevant for a small segment of the population but a larger percentage of students at these schools.
Broader Trends Across Institutions
For a broader analysis, data from 200 institutions across four categories (private nonprofit colleges with large endowments, other private nonprofit colleges, public flagship and other “R1” institutions, and other public institutions) were examined for the 2018-19 and 2022-23 school years. The results show that college prices fell by 10% to 15% over the past four years, with sticker prices also falling by 5% to 10% after adjusting for inflation.
The Real Cost Burden
Inflation has significantly affected these trends, as institutions attempt to limit sticker price increases. However, expected payments for lower-income students, in the form of student loans and employment, have not kept pace with inflation. For example, a student from a family earning $40,000 is expected to pay a net price of around $14,000 at public institutions, which, after factoring in federal loans and work-study jobs, still leaves a $6,000 out-of-pocket bill – an insurmountable hurdle for many.
Private institutions without large endowments are even less affordable for lower-income students, who face a net price of $22,000 ($14,000 out of pocket). Only highly endowed private institutions offer net prices that are relatively affordable for lower-income families.
Focus on Affordability
This analysis highlights where the real problem in college affordability lies. While a college cost of $80,000 is substantial, even for families earning $300,000, the $6,000 cash payment expected from a student whose family earns $40,000 is likely an insurmountable barrier. This financial burden is a major obstacle to achieving the social mobility that a college education can offer. Addressing this issue should be our primary focus.