Conflicting Information about Trends in Net College Costs
November 17, 2011
Thus the feast/famine cycle in federal student aid funding makes it difficult to report on trends in college costs. The choice of start and end dates affects whether the trend is tracking upward or downward. This timing flaw in the analysis also means that the magnitude of the trend is exaggerated in both directions.
The sensitivity of the results to the choice of years for comparison can also lead to results that gyrate from year to year even within the same data set. For example, the College Board’s Trends in College Pricing 2010 shows a 23% decline in net tuition and fees at public 4-year colleges (from $1,990 to $1,540) and a 7% decline in net tuition and fees at private non-profit 4-year colleges (from $12,230 to $11,320) from 2000-2001 to 2010-2011 in constant 2010 dollars. But the College Board’s Trends in College Pricing 2011 shows an 87% increase in net tuition and fees at public 4-year colleges (from $1,330 to $2,490) and a 3% increase in net tuition and fees at private non-profit 4-year colleges (from $12,650 to $12,970) from 2001-2002 to 2011-2012 in constant 2011 dollars. Thus the “trend” in net tuition and fees at public 4-year colleges swung from a 23% decline to an 87% increase in just one year.
The choice of years to compare in the CCAP report and the Chronicle of Higher Education article was dictated in part by the availability of data. One report was based on data from the Integrated Postsecondary Education Data System (IPEDS). The most recent IPEDS data is from 2008-2009 and will be updated in December. The other report was based on College Board data from 2010-2011.
A better approach would involve comparing trends using a moving average of recent college costs as opposed to comparing a single year’s costs. The feast/famine cycle of changes in net college costs causes significant volatility from one year to the next. Using a moving average damps out this volatility, demonstrating a clearer trend of increases in net tuition rates, albeit not to the same extent as the increases in published tuition rates.
Further confusion arises from a lack of precision in the terminology used to describe college costs. The terms “net tuition”, “net price” and “net cost” are sometimes used interchangeably, even though they have different meanings. Net tuition is the difference between the tuition and fees and the grants. The grants include private scholarships and education tax benefits, not just institutional grants. Net price is the difference between the full cost of attendance and the grants. The full cost of attendance includes room and board, textbooks and other expenses in addition to tuition and fees. Net cost is the difference between the full cost of attendance and the financial aid package. The financial aid package includes loans, which have to be repaid, and do not really reduce college costs. Each of these terms begin with the word “net”, increasing the likelihood of confusion by consumers and policymakers.
Trends in net price are much more informative than trends in net tuition. While students must still pay for food and housing even if they don’t go to college, the cost of room and board often exceeds the incremental cost to the family of having the student live at home. (If the cost of food and housing should be omitted, then perhaps the opportunity cost of lost wages should be included.) The grants a student receives are also based on the cost of attendance, not the tuition rates. The affordability of a college education depends on net price more than it depends on net tuition.