This spring, headlines indicated that the price tag at several colleges would cross six figures as soon as next year, when taking into account tuition; fees; and indirect costs such as course materials, transportation, and other personal expenses. Universities are required to publish their full cost of attendance, but higher education experts are cautioning that published college “sticker” prices are “incomplete at best, misinformative at worst,” Higher Ed Dive reports. The majority of students receive tuition discounts through need-based and merit-aid; yet, the focus on published sticker prices is distorting conversations about college costs.
“Ignore the sticker price,” Phillip Levine, Wellesley College professor and author of the book A Problem of Fit: How the Complexity of College Pricing Hurts Students—and Universities, tells Higher Ed Dive. “It is a meaningless number. It tells you nothing.”
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What students and families actually pay
Several factors, including annual household income, determine net prices, or how much students and families actually pay to attend college after deducting discounts in the form of grants and scholarships. In the 2023-24 academic year, the discount rate for all undergraduates increased to 51.9%, up from 50.8% in the previous year, according to a May 2024 study from the National Association of College and University Business Officers (NACUBO). At private nonprofit colleges and universities, the discounts were even more substantial, reaching a new high of 56.1% for first-time, full-time students.
Net prices are typically higher for students from wealthier backgrounds and lower for families demonstrating financial need. Between academic years 1995-96 and 2019-20, the average net price at private colleges for households making approximately $50,000 a year increased 23% to $24,600 after adjusting for inflation, compared to a 42.6% increase to $52,900 for a family with an annual income of $250,000, according to Levine’s analysis from the Brookings Institution. In academic year 2019-20, the difference in sticker price ($70,900) and net price ($24,600) for households with an annual income of approximately $50,000 was $46,300, compared to a difference in sticker price ($70,900) and net price ($52,900) of $18,000 for families making $250,000 a year.
Public colleges, which have a lower average sticker price than private institutions, also offer discounts. In 2019-20, the average sticker price at public institutions was $33,200. Households making approximately $50,000 paid $15,100 less than the sticker price, compared to $3,900 less for households making $250,000.
Even with such discounting, increases in net prices still are rendering college unaffordable for many lower-income families, despite need-based aid. “If you’re making $50,000 or under, you still have to come up with almost $20,000, which is essentially impossible,” Levine says.
Cost of attendance varies across institutions and depends on a variety of factors, such as a school’s location, its competitors, job placement rates for graduates, and marketing, experts tell Higher Ed Dive. For some families, higher pricing indicates quality, while it may turn off lower-income students altogether. Tuition “resets,” or when colleges drop sticker prices to be closer to net prices, is one strategy some schools are using to be more transparent about pricing while boosting student enrollment.
“We know that lower-income students are more price sensitive generally,” says James Dean Ward, principal of policy and economic research at nonprofit Ithaka S+R. “They may face a higher level of sticker shock. So the reset may help with that.”