Why college tuition and fees are rising faster than financial aid

Students and their families should look beyond the "sticker price" to understand the true cost of colleges. (iStock)

As millions of Americans work to pay off student loan debt, college costs continue to climb, with average tuition, fees, room and board moving higher at public and private schools alike.

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Price growth has moderated recently but often outpaces the rise in grants and scholarships that help many families afford a college education, according to the nonprofit College Board.

Growing educational expenses are clear in colleges’ published prices.

Average cost of college in the U.S.

Average published costs for 2019-2020 for full-time students at private, nonprofit schools grew by 3.3 percent to $49,870 from the previous academic year, before adjusting for inflation, the College Board reported last year.

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In-state costs for full-time students at public colleges and universities rose 2.6 percent to $21,950 on average, while the out-of-state public-institution price tag increased by 2.5 percent to $38,330, also before inflation.

A breakdown of tuition and fees:

  • At private schools, tuition and fees average $36,880 in 2019-2020, a 3.4 percent, or $1,200, increase from the previous academic year, while room and board comes to $12,990, up $380.
  • At public four-year schools, 2019-2020 in-state tuition and fees average $10,440, up $230; out-of-state tuition and fees average $26,820, up $620.
  • Room and board for in-state and out-of-state students at public schools average $11,510, a $320 increase.

Costs at public two-year schools rose as well, with in-district tuition and fees up 2.8 percent, or $100, to $3,730, this year.

Looking at longer-term pricing, published tuition, fees, room and board for full-time in-state undergraduates at four-year state institutions rose to $21,950 for the current academic year from $12,440 in 1999-2000, in 2019 dollars, according to College Board data.

Average net prices – costs after accounting for grants, scholarships and tax benefits – at those schools grew to $15,380 from $9,070 over those 20 years.THESE GRADUATE DEGREES HAVE THE WORST DEBT-TO-INCOME RATIOS

At four-year non-profit private institutions, average full-time undergraduate published prices rose to $49,870 this year from $33,060 in 1999-2000, also in 2019 dollars. Net prices in that time increased to $27,370 from $22,600.

Why is college so expensive?

“There are many reasons why college costs keep driving up, one of them being demand,” said Elaine Rubin, spokeswoman for Edvisors, a financial aid advisory firm. The popular notion that a college degree is necessary to succeed creates demand for limited spaces, she noted.

At the same time, Rubin added, colleges aim to attract the students they’ve accepted. “They can do this by offering certain high-end amenities in housing, technology and even fitness facilities,” she said. Students on college tours can “be swayed to enroll at a particular school by how they envision their lives for the next few years living with access to high-end amenities.”

The highest-priced schools must explain their cost increases to the federal government, according to the Department of Education, which reported last year that the main reasons cited included new staff, greater resources to meet higher enrollment, salaries and benefits, new programs, and technology and infrastructure updates.

It’s important that students look beyond colleges’ published charges, or “sticker” prices, to net price – their real expenses after-tax benefits and any financial aid they’re likely to receive for a given school, based on family finances, grades and other factors. To estimate what they might pay at particular schools, students can check out the College Board’s net price calculator.

College costs continue to rise as financial aid lags

In a report on college pricing trends released last fall, the organization said financial aid isn’t keeping pace with rising costs for many students, with increasing income inequality intensifying the problem.

At the same time, several elite private schools, including Harvard, Princeton, Brown, Columbia, Rice and Swarthmore, now offer full or generous partial scholarships that enable students of modest financial means to matriculate without taking on heavy student debt.

A number of colleges also offer work-study programs to help defray costs for those from low- and middle-income families; some schools make work-study initiatives a centerpiece of their curriculum and cover all student expenses, so graduates can avoid heavy student loan debt.

Having open conversations about college finances can be tricky for families, Rubin noted. Parents need to balance family finances and their desire to help children achieve educational goals, she said.

“It’s okay for a family to compromise certain aspects of their lives to help their children go to college, but those compromises should not sacrifice the financial stability of the household,” said Rubin.

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She suggested that families, via the Consumer Financial Protection Bureau, compare financial aid packages aligned with their budget, asking schools if the offered grants and scholarships extend beyond the first year. She also recommended checking out the U.S. Department of Education’s College Scorecard.

“Set a financial budget before you get started. How much can the student and family contribute to a college education? Some families evaluate this on an annual basis or for the total amount of years for the program,” said Rubin. “If you do this before you get started, it can help narrow down schools — both at the beginning of the process and the end.”

As a resource, the U.S. Department of Education also provides data on the most and least expensive schools in its College Affordability and Transparency List. Users can search for most and least expensive private nonprofit or public institutions [in-state tuition], based either on tuition alone or net prices, which the government defines as cost of attendance – including tuition, fees, room, board, books, supplies and transportation – minus grants and scholarships.