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College Prices Are Flat. But Is It a Good Thing?


It’s become a truism that the cost of college rises every year, putting a quality education out of reach for many families. Yet a new College Board report has found that despite the constant tuition increases, the amount that students actually pay for college has remained essentially flat for the last decade as scholarships and other aid programs have risen to keep pace with them. As the New York Times notes, the average student today pays only 57 percent of the sticker price, nearly 10 percentage points lower than the the rate in 2003. But these numbers are only averages; a look at more specific groups reveals how this system of higher tuition wit high discounts has created distortions in the market where some students are required to pay far more than others:

For private, nonprofit colleges, the combination of higher posted prices and deeper discounts has resulted in bigger disparities in what different students pay: those with low incomes pay lower net prices than they did a decade ago, while those who earn more pay more. […]

“What’s happening with that upper-middle group is a real concern,” said Catharine Bond Hill, president of Vassar College and an economist who has researched college costs extensively. “The net price for them is pretty challenging.”

Rather than looking for ways to lower overall prices, the proliferation of grants and aid programs has essentially kept prices flat by requiring an increasingly small group of students to pay most of the school’s costs while keeping prices flat for everyone else. By some measures, this could be said to be working, but it has also muted the price signals that would incentivize colleges to keep their costs in line.

Fortunately, the schools are beginning to feel some competition from a newcomer on the higher-ed scene:

But college administrators worry that they may be approaching a breaking point in their ability to keep raising prices, whether or not those prices reflect what most people really pay. And many of the less-wealthy private colleges feel threatened by the rise of inexpensive online courses and degree programs, and a decline in the college-age population.

In case we needed another reason to support MOOCs, this is it. Colleges need to start feeling the pressure.

[College quad image courtesy of Shutterstock]

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  • qultr

    This has been a problem for people who are well-off but not wealthy. Private schools are out of reach for their children because, while they can afford in-state tuition, they cannot afford private school tuition, and their income makes them ineligible for financial aid. Perhaps this is a problem that many people would be happy to have, but it really is too bad to deny the best schools to worthy students who might otherwise take advantage of them.

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