Tuition is rising faster than incomes. But a new private college price war and the improved economy have meant lower prices for many students.
College became a little less affordable again for most students in 2014, as the typical school raised prices faster than financial aid—and faster than average income growth.
In its annual analysis of the state of college prices, the College Board found that most higher education charges continued to outpace the 1.5% average growth in incomes. The cost of attending the typical public university–including dorms, dining hall privileges, textbooks, and miscellaneous expenses—reached $23,410, up 2.6% from last year. Private college costs hit $46,272, up 3.4%.
Even after subtracting scholarships and grants, the average cost of a public education rose by 3.5%. The average net cost of attending a private college was up 4.1%.
A Few Bright Spots
With college costs continuing to eat up a higher percentage of most families’ incomes, “you can see why there is a lot of stress for people” says Sandy Baum, a co-author of the College Board report.
But, she added, “things are looking a little bit better” for some students. The lowest-cost option—attending a local community colleges while living at home—remained comparatively affordable. The total for tuition, fees, textbooks, and commuting to campus averaged $6,410 this year, a 3.1% increase over 2013. But since most of those students received grants or were able to take advantage of at least some of the $2,500 American Opportunity Tax Credit, the net cost of attending a community college averaged $1,320.
And the College Board noted that in real terms—in other words, after adjusting for inflation—private colleges are about 4% less expensive than they were in 2008. The reason: A decline in the number of 18-year-olds has sparked a scramble to fill seats at many small and non-prestigious private colleges, says Susan Fitzgerald, who analyzes college finances for Moody’s Investors Services.
Elite colleges are in such high demand that they can charge whatever they want. But schools without national reputations, Fitzgerald says, “are facing a very competitive environment, and one of the ways they are competing is on price.” So while such colleges typically hike published tuition prices, they are also raising the amount of financial aid they offer. As a result, the net prices charged to new freshmen have remained fairly flat.
A Pause at the Publics
In 18 states, the average cost of public college tuition rose by less than the 2% inflation rate, the College Board found. For example, after many years of dramatic tuition increases, the University of California, Berkeley charged tuition and fees of $12,972 this year. While that’s an 80% increase over 2007, it’s a rise of only 1% from last year. At the other end of the country, tuition and fees at the University of Maine averaged $10,606 this year, up only $6 from 2013, and $24 from the fall of 2011.
Many public universities have been able to moderate tuition inflation because the economic rebound has increased state tax coffers. And states have used some of those gains to at least partially alleviate the severe higher education budget cuts of the past few years, Baum says.
But, she notes, on average states are providing about 20% less funding per student to public colleges than they were prior to 2007.
A recovery in state budgets has put tuition inflation on pause in many states, she says. Unfortunately, there’s no guarantee that tuition hyperinflation won’t return. “We will again at some point experience tighter state budgets,” Baum warns.
In fact, in an ominous sign, some college leaders are already pushing for tuition hikes in 2015. Janet Napolitano, president of the University of California system, last week requested permission to raise tuition by 5% a year for the next five years.
|Public universities: Sticker price||Public universities: est. average net cost (after grants and tax aid)||Private colleges: Sticker price||Private colleges: est. average net cost (after grants and tax aid)|
|1-year $ increase||$584||$584||$1,522||$1,372|
|1-year % increase||2.6%||3.5%||3.4%||4.1%|
Source: The College Board
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