As college costs rise, sticker shock eased by student aid

By Daniel de Vise
Washington Post Staff Writer
Wednesday, February 10, 2010; B01

If the $50,000-a-year price of a prestigious private college looks unreal to most families, well, it's not real. At least, not for most students.

The sticker price of private college has soared in the past five years, feeding a common perception that the most expensive schools are beyond the reach of most families. But net price -- the amount the average student actually pays -- has declined.

The higher education marketplace increasingly resembles a mall on the day after Thanksgiving. The published price of a college education has spiraled far above what the average student pays after subtracting grants, tuition discounts and tax benefits.

Published tuition, fees and living expenses at private nonprofit colleges average $35,640 in the 2009-10 academic year, according to the definitive annual report Trends in College Pricing by the nonprofit College Board. But net price averages $21,200. Adjusted for inflation, one has gone up. The other has gone down.

"The price, on the surface, is more than a middle-income family can pay," said Alison Rabil, assistant vice provost and director of financial aid at Duke University. "But we're not asking families to pay that amount."

College finance has grown increasingly complex. The phenomenon of rising sticker price is partly a marketing trick, partly a tool to redistribute the costs of college across income levels.

Tuition and fees have risen by nearly one-third at private nonprofit colleges since fall 2004, or 15 percent in inflation-adjusted dollars. But aid has risen faster.

The difference between sticker price and net price "may be the single most misunderstood fact" in higher education, said David Warren, president of the National Association of Independent Colleges and Universities. "Net tuition is only 45 percent of the advertised tuition. That's a pretty significant difference."

The most selective, well-endowed colleges dispense ever-greater sums of grant aid according to need -- and rising tuition has broadened the definition of need. At the most expensive colleges, the term now applies to families making $200,000 a year.

With a household income of about $100,000 and his family's home in foreclosure, Nicholas Parks didn't know whether he fit George Washington University's definition of need. As Parks approached college admissions season last winter, GWU was a $53,000-a-year dream school.

"I didn't really have my heart set on it," he said, "because I didn't think I'd be able to afford it."

The school rewarded his dream with $35,000 in grants, covering most of his tuition and fees, leaving the Parks family to handle room and board, books and car fare from Fairfield, Conn. Parks, 18, is midway through his freshman year.

"I was shocked when I got it," Parks said. "I really never thought I was going to come here."

About 55 percent of incoming George Washington freshmen received grants, and the average grant recipient got $23,640. The net price for a year's education for those students: $29,052.

Tuition is rising even at less-selective regional colleges. Many offer increasingly generous "merit aid" and tuition discounts rather than a low sticker price, on the theory that students tend to equate price with quality. At some institutions, a large majority of students pay less than full price.

Net price has declined by a few hundred dollars among private nonprofit colleges in the past five years, in inflation-adjusted dollars, according to the College Board analysis. Net price rose slightly in the 2009-10 academic year because of the economic downturn, as grant aid trailed tuition increases for the first time in several years, according to Sandy Baum, a College Board researcher.

Looking back over a decade instead of just five years, the net price of private college is only modestly higher now -- up 7 percent -- the report shows, even though tuition has swelled.

The net cost of public colleges has risen slightly in recent years because of dwindling state funds. At the University of Maryland, for instance, 57 percent of in-state freshmen received aid in 2008-09, according to data provided by the school. Grants averaged $7,535. They brought the cost of U-Md., including living expenses, down from a list price of $21,163 to a net price of $13,628 for grant recipients.

Most colleges don't advertise net cost, for the same reason hotels don't post their lowest rates on guest room doors. No two students are likely to be paying the same amount. Selective schools don't want to create false hope in aid applicants, and less selective schools don't want to diminish the prestige of a high sticker price.

"It's complicated, because students' unique situations make them eligible for different amounts of aid," said Haley Chitty, spokesman for the National Association of Student Financial Aid Administrators.

To clear the air, the federal government will require every college to post a "net price calculator" on its Web site by August 2011. The calculator must estimate what a particular student will pay to attend the college, based on the family's finances and the school's aid budget.

The notion of estimating what each student will pay is daunting to many private colleges because pricing often depends on factors other than need. How will the calculator account for merit aid and tuition discounts?

"That is going to be the huge question as people begin to reckon with this," said Douglas Bennett, president of Earlham College in Indiana.

Several schools, including Yale, Princeton, Amherst and Williams, have net price calculators or aid "estimators" on their Web sites. Estimating net price is comparatively simple at those schools, which have enormous endowments and dispense aid entirely based on a student's need and with fairly predictable results. At less wealthy, less selective schools, aid is often determined case by case.

Lauren Lightfoot, 21, got a modest grant to attend Georgetown University, one of several dozen colleges that pledge to meet the full need of admitted students. She chose Georgetown over the University of Georgia and Vanderbilt University, each of which she could have attended on full scholarship.

"It's just like buying Coke over the store brand soda," she said.

Lightfoot comes from a middle class family in suburban Atlanta. Her father works for the Postal Service; her mother is an electronic technician at AT&T.

"I don't think that they considered me needy," she said of Georgetown, where she is an English major. "The school costs about $55,000 a year. Two hundred thousand dollars, that's a lot of money for anyone."

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