Sticker Prices Go Up at Public 4-Year Colleges, but at a Slower Pace

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For the 2012-13 academic year, in-state tuition at public four-year colleges increased by 4.8 percent over the previous year, the College Board reports. That compares with an 8.4-percent jump the year before. Above, a campus scene at the University of California at Los Angeles last spring.
October 24, 2012

This year's report from the College Board on college pricing opens with what passes for good news: The annual increase in average published tuition and fees for in-state students at four-year public colleges, 4.8 percent, is smaller than it has been in more than a decade. At private nonprofit four-year colleges, the increase was 4.2 percent, according to "Trends in College Pricing," released along with a companion report, "Trends in Student Aid," by the College Board on Wednesday.

But college affordability has become a hot topic in this election year, with Pell Grants, student-loan debt, and the value of a degree repeatedly referenced in presidential debates. Escalating tuition increases, the thinking goes, put a college education out of reach for many families. But the rhetoric is often not steeped in data. The national conversation about college affordability remains stubbornly focused on sticker prices, although most students don't pay that much.

In its annual reports, the College Board tries to hammer home the importance of net price: what students pay after grant aid and tax benefits. Two-thirds of full-time students receive grants, the report points out. And even some of those who do pay the sticker price upfront still benefit from higher-education tax breaks.

This year's smaller increase in published tuition at public four-year colleges amounts to good news because of what's happened in recent years. Prices have risen sharply, as most public colleges scrambled to compensate for big cuts in state support. Last year tuition at public four-year colleges increased by 8.4 percent over the previous year. (Much of the jump, the College Board pointed out, was fueled by California, a state facing a budget crisis.)

Good news is relative. "It's not like there's something to be excited about, about things reversing directions," said Sandy Baum, a consultant for the College Board and an author of the reports.

But this year's data do serve as a reminder that state budgets are cyclical, and tuition prices respond to them. Neither tuition prices nor student-loan debt is bound to keep growing at an accelerating pace, said Ms. Baum, who is a senior fellow at the Graduate School of Education and Human Development at George Washington University.

"It's really important," she said, "that the increases are decreasing."

As it happens, slowing the rate of tuition increases is a goal set by President Obama when he accepted the Democratic nomination for a second term, promising to "work with colleges and universities to cut in half the growth of tuition costs over the next 10 years."

The president's proposal, which has yet to be described in much detail, would not only create a competition (similar to elementary and secondary education's "Race to the Top") to reward states for holding down tuition, among other goals, but also remove funds from colleges that don't offer a good value at an affordable price.

For the time being, the federal government is working to improve consumer information, through new tools like net-price calculators, financial-aid "shopping sheets," and watch lists of colleges with high prices or large increases in tuition.

'Less Encouraging' Net Prices

For the 2012-13 academic year, according to the College Board, the average list price for in-state students' tuition and fees at public four-year institutions hit $8,655, up from $8,256 the year before. At private, nonprofit four-year colleges, the sticker price for tuition and fees rose to $29,056, compared with $27,883.

When it comes to what students actually pay, the pricing report says, the news is "less encouraging" to families worried about footing the bill. Average net price at public four-year institutions increased measurably for the second year in a row. That is after a period in which net prices dropped, because Pell Grants, tax incentives, and military benefits all experienced large increases. At public two-year colleges and private, nonprofit four-year colleges, a similar pattern of increases emerged.

Full-time, in-state undergraduates paid an average of $2,910 after grant aid and tax benefits at public four-year institutions in 2012-13. Students at private, nonprofit four-year institutions paid an average net price of $13,380. In 2011-12 the net price was $2,620 at four-year public colleges and $12,600 at four-year private nonprofit colleges. (The College Board defines net price by looking at the average price paid by all full-time undergraduates, on financial aid or not, after grants and federal tax benefits are taken into account.)

Despite what the increases in net price may suggest, the federal government is not pulling back its support, said Ms. Baum. Pell Grant spending did fall, but only because a brief experiment in giving some students two grants in a single year was eliminated, she said.

Still, the federal government is unlikely to keep increasing its grant aid and tax benefits at the same rate as it has been.

Neither sticker price nor net price captures the complex reality of individual variation, the report notes. Prices can be quite different from college to college. Even on the same campus, individual students might pay very different amounts.

Favoring Top Students Over Needy Ones

The College Board's other report, on student aid, provides more-detailed information on how students pay for college, but it uses data from 2011-12.

The report documents shifts in the source of and philosophy behind grant aid. For example, in 2011-12, 49 percent of undergraduate grant aid came from the federal government, up from 37 percent a decade before.

And states, the report notes, are awarding more aid without considering students' financial need. In the mid-1980s, the states awarded only 9 percent of their undergraduate grant aid without regard for need. But by 2011-12, they were distributing 29 percent that way. More states are focusing their aid programs on keeping top students rather than helping the neediest ones.

Student-loan debt, much in the news, also gains more context in the College Board's report. About 60 percent of students who graduated in 2010-11 from the public or private nonprofit four-year institution where they started had taken out loans, the report says. Their average debt was $25,300. A larger proportion of graduates of private nonprofit colleges borrowed, and their average debt was about $6,000 higher.

The more than $1-trillion in total outstanding education debt, including from graduate and professional school, can sound scary. But that sum is driven up by increases in enrollment. It's important to look at the experiences of individual borrowers, said Ms. Baum, instead of just throwing big numbers around. Even now, most undergraduate borrowers graduate with much lower debt levels than talk of a crisis or a bubble would have one believe.

Of course, college affordability is affected not only by rising prices but also by family resources. Average family incomes were lower in 2011 than they were a decade ago, after adjusting for inflation, according to census data cited in the report.

In addition, the report notes, "families have not been able to plan for the fluctuations in the value of the assets they have saved to pay for college."

The news in the reports probably won't spell relief. "Rising tuition levels cause even more problems," the College Board says, "because of the economic environment in which they are occurring."

While increases may have slowed, many students and families are still struggling to keep up.