The chart you posted is the “in-state” summary. That chart is mixing a bit of apples and oranges, and may not be indicative of the real trend. I’m not going to investigate the historical details, but the green bar is the total expenses for an in-state student, and the red bar is the net price based on the AVERAGE financial aid award (it’s around $19k). Here are some of the issues that come to mind:
The net price is applicable to only 52% (per the site) of the incoming class, so the other 48% is paying 100% of the increase in the green line.
The average award granted by the school is the same for both in and out-of-state students. Given the $40k difference in starting numbers, it’s unlikely that net price is correct for in state students.
A school like Michigan has some very complicated levers to pull in terms of admission finances. In state vs out of state and the awards granted to those cohorts in terms of both participant percentages and financial support can make “average” misleading.
Any review right now will struggle to account for the impact of the pandemic. Direct impact during 2020 through 2022 varies by school, and the post pandemic impact on inflation and other factors won’t really be known for some time. Any charts that change direction in 2020 should be considered with a very skeptical eye.
In general, I think anyone planning to attend college right now should expect their costs to increase over the next 4 years, and ignore any downward trend since 2020. I believe there has been some much-needed “belt-tightening” in spending, but the costs of running any organization are increasing.
So as an aside, I note this whole conversation was kicked off by a WSJ article offering various summaries and proposed conclusions based on those summaries. At a high level, I would agree these sorts of summaries have limited use to most families actually looking at paying for college in the near future. What they really need to know is what it will cost their student in particular to attend the specific colleges they are thinking of using.
But to the extent people are interested in the sort of “big picture” discussion invited by the WSJ article, then it can make some sense to look at summary data–understanding we do not need to simply accept the WSJ’s way of selecting and framing the available data.
And one thing that is somewhat nice about our investigation into the data so far is there is a lot of consistency in the overall trend. Not so much I would suggest you should not actually look at any specific college of interest. But enough that we don’t appear to be finding any cases where a significant segment has a different-shaped curve from the others.
With those observations in mind . . . .
That’s correct. The easily available summary data on net cost of attendance involves either in-state publics or privates.
Based on what I have seen in a few individual cases (we looked at one above with Michigan, for example), if you look at out-of-state net cost of attendance, I think it is probably at least roughly tracking between in-state public and private at the average/median. But as noted above, if there were specific out-of-state colleges you were interested in, you would obviously want to investigate that yourself in those cases.
Right, if you are going to be full pay, you will be interested in the full pay trends. Again that is available in summary form for in-state publics (all or just flagships, the latter thanks to the WSJ), privates, and of course individual colleges. Generally, it appears in all of the summary cases and at least commonly in individual cases, the inflation-adjusted full pay cost has come down recently. I note again the College Factual numbers do not appear to be adjusted for inflation, so you would have to make that adjustment to compare individual colleges at College Factual to the summary trends.
I don’t know if I would use the word “misleading”, but obviously if you have a particular interest in attending Michigan, you would ultimately want to know your own actual cost of attendance. In terms of understanding how Michigan is operating financially as a whole, it is very much true you would need to dig into all sorts of details about what it was doing, including if (as the WSJ suggested has been common recently) it might have expanded the ratio of OOS to IS to help subsidize IS.
That’s part of why I find it interesting that this broad inflection point in net cost of attendance that is showing up in many different series (broader, more narrow, and individual) is showing up in 2016/17, or indeed before. Obviously that is many years pre-pandemic.
There is also an inflection point observable around the same time for full pay, but in that case it was more that it plateaued in inflation-adjusted terms pre-pandemic, as opposed to actually going down like with net cost of attendance.
In fact, the net cost of attendance decline in this period is fairly describable as full pay plateauing, but grants continuing to go up, which creates a downward trend for net cost of attendance. It was then accelerated in recent years, although a lot of that is probably attributable to just inflation being higher, and full pay increasing in nominal terms at a lower rate.
Are you talking in nominal or inflation-adjusted terms?
If you are talking in inflation-adjusted terms, then it would appear in many cases you would actually have to be ignoring a pre-pandemic downward trend (for not full-pay), or flat trend (for full pay), one dating back to 2016 or so generally, and earlier in some cases.
And obviously people are free to do that if they like. But given this data, I personally don’t know if it makes sense to expect either inflation-adjusted net cost of attendance or full pay to start generally increasing again like it was before 2016ish. Obviously anything could happen in theory, I just wouldn’t personally expect that to be the most likely scenario.
And of course any individual college could do anything.
Exactly. Looking at gross tuition costs is misleading. Average net tuition costs are decreasing as I and some others posted earlier.
I am not saying that rising gross tuition costs don’t impact some families…it does impact full pay families, and many families are full pay even though paying the full COA is not possible (regardless the reason).
I experienced the change in net price as an administrator. I believe that the proliferation of voices on the internet saying, “You don’t have to pay full price” contributed to this. Suddenly, more & more students demanded more & more free money … even turning down a less expensive net price at my school to take a higher scholarship amount at another school. It became a new landscape. As an administrator, it made life difficult - as a student/parent, the shift was often positive. Overall, my concern is that schools may be discounting more than they can afford to discount. But it’s not going to change, IMO, so schools will either figure out alternative revenue streams or make very hard decisions (like WVU is currently facing, although the reasons for their cuts may be due to factors other than tuition discounting).
Just at a high level, I think there are a variety of reasons why even if full pay is just tracking upper-middle-class incomes (long-term), or indeed tracking below that (medium-term), or way below that (short-term) . . . some full pay families are going to see that as bad.
Like, obviously in some cases, their own family income will not be tracking like that.
Almost equally obviously, income and savings are two different things. Generally at the median, over longer periods, savings has an exponential relationship to income. Like, if median Household A is on an income track double median Household B, eventually it may end up with like 8 times as much savings, not 2. But some households are not median savers, and at any given income level there are some households basically not saving at all, or indeed accumulating net debt. And those full pay households might find the “sticker shock” to be a bigger deal than those full pay households that have been saving carefully for this moment.
A bit more subtly, but probably behind a lot of the negative sentiment in some online circles–if you live in a very high housing cost area, a lot more of your savings may end up in the form of net home equity (home market value minus mortgage).
Interestingly, colleges can vary a lot in terms of how they consider net home equity when granting aid, with some not considering it and some capping how much they will consider and some considering it without caps. But your income and such can make you full pay even at colleges which do not factor in your home equity, or cap it.
OK, so in abbreviated form:
Professional family A lives in a market with low housing costs, saves a lot, ends up with some largeish 529s.
Professional family B lives in a market with high housing costs, saves a lot, ends up with a lot more net home equity than family A, but no 529s.
From an outsider’s money-is-fungible economic point of view, families A and B may be equally able to pay the same college costs.
But in terms of how it FEELS to families A and B? Family A may be more inclined to think, “Oh well, that’s what it is for” as they see their 529s used up. Whereas family B may be less sanguine about taking out a second mortgage.
Anyway, again my point is there are many reasons why even favorable trends in full pay for the sorts of families who would be full pay may not always seem all that favorable to some of those families.
Part of what I find fascinating about what you are describing is I have seen some version of this in many other industries I have had occasion to study in some detail.
As we were discussing above, it is not unusual for industries to go through different periods where consumers have more or less relative pricing power. And typically, if consumer demand is leveling off or declining, this can lead to increased consumer pricing power.
So we know from other statistics that total four-year college enrollment in the US has been going down in recent years. And as I mentioned before, while I doubt it is that dire for the “national” US colleges, I am pretty sure it is true that the demand trend even for them has at least relatively slowed down, possibly even close to leveling off.
So to me, what you are describing is exactly what I would expect in conditions like that.
And maybe it is really just that simple (if you are the kind of person to call such a thing simple, at least).
I think many privates are discounting to attract more eyes because they are struggling. Better to show a $40k price than a $70k price with $30k discount.
They may be discounting too much but they’ve decided on a # to bring in enough customers. And they may be selling their product under cost without the means to cover that deficit. That’s why we see mergers or closures.
And even larger schools cutting back.
On the other hand, the wealthier schools are adding amenities to try and entice kids. Some are even going into public/ private partnerships, especially for dorms.
It’s hard for some to keep up. They figure some revenue is better than no revenue but at some point, the entire system can come crashing down.
The next huge spike in automation, unemployment, etc - will have parents scratching their head - is $400k plus which is what it will be worth it ?
The colleges currently have the gift of short term memory. Kids are doing so well.
But that’s cyclical and then how will colleges adapt when everyone is struggling. Or when the market crashes and kids can no longer afford to go two years in because their parents lost the means to pay. That happens some today but can happen a lot tomorrow.
We see how WVU is …. And they’re not the first. Or last. And they have a state behind them.
Yes, that is another thing you typically see in industries going through a demand cycle like this.
Some producers will have made more efficient investments, been more careful with saving for a rainy day, or just get lucky with their market position. Others will be at a disadvantage. And this can lead to some producers failing financially during a down cycle, which often means they are forced to close or merge.
Typically if this sort of cycle goes back and forth over time, the net effect is increasing concentration, and we have seen that in a lot of industries.
But the U.S. college industry, if you will, more experienced a fairly consistent increase in demand for many decades. Sure, there were some brief periods where something would happen to decrease or increase enrollments, but mostly it was just up and up.
That all changed around 2010. And that was a truly unprecedented change in this particular industry. And in this particular industry, I am not sure it is going to change back. It just may be the “new normal” for a very long period.
So, that could get more and more “interesting” over time. Not less.
Is it really? I thought most studies showed the opposite? And given the inability of many parents and students to understand the math, the latter is much better for the college, because they can increase the $70K cost for inflation each year while keeping the $30K merit award constant.
I guess my logic is, if I have a $500k budget for a house, I’m not going to look at houses listed $600k.
Or if I can only afford a Camry, I’m not going to look at a Lexus.
Some schools have already reduced tuition (and correspondingly aid). I would hope they are using a strategy to optimize revenues via increased enrollment and not crumble more.
But if a house builder said, come and look at our lovely $600K houses and we’ll give you an on the spot discount of “up to” $200K then they’d get plenty of interest from people with a $500K budget.
Or “our houses are worth $800K but this weekend only, we’re selling them for $500K”. That’s marketing 101.
I think the colleges that have cut tuition are doing it to get attention, because everyone else is offering discounts. A bit like Costco saying “no hassle pricing on our cars” even if they aren’t as cheap as the best price a good negotiator might get in a dealership. And because they have a weak brand so they can’t credibly pretend you are getting an education worth $70K.
FWIW, if you walk into new home subdivision, or look at home builders websites, then pricing discounts or giveaways, will be published to consumer, depending on market conditions of course.
But yes, colleges are more opaque with their net tuition numbers than home builders.
In slow markets, resale homes on the various MLS’s will advertise discounts (“Price reduced $100,000”) as well. We just haven’t had a market around here where discounts are necessary to sell homes in some time.
There have been plenty of times in housing markets when houses sell for below asking price, sometimes well below (hello 1990 market, 2001 market, 2008 market!). Most people understand they’ll be negotiating a price.
Most people I know look at houses priced above what they hope to spend. Lots of people like the idea of getting ‘more for their money’. Low-ball offers are a well known gambit.
Absolutely! Can’t tell you how often I’ve heard “Look what I got for 30% off!”, while I’m hearing (=thinking to myself): “Look what I got for $70.00, that we didn’t need in the first place”
Even if what you purport is true, this difference during a period of very high inflation , when colleges were virtual, is very small and insignificant when compared to the increase in tuition in the last 2 decades
As we have been discussing above, the first inflection point was actually circa 2016. Between September 2016 and September 2019 (so all prepandemic), CPI College Tuition and Fees increased about 7.03%. CPI All Items increased about 6.35%. So, a little more than general inflation, but far less of a gap than in the prior era.
Just eyeballing the charts (CP-9 and CP-10) linked above, it looks like the recent inflation-adjusted decline has taken the full-pay cost of attendance for in-state publics back to around 2010-11 levels, privates to about 2014-15 levels.
In terms of net cost of attendance, in-state publics are back down to more like 2006-07 levels, and privates somewhere even earlier than that (the chart doesn’t go back far enough).
The difference of course is grant aid. Starting circa 2016, in these charts you can see the same sort of pre-pandemic reduction to just a very low inflation-adjusted increase in full-pay cost of attendance as we saw using the CPI series. But net cost of attendance starts actually declining at that point, because of grant aid.
So the comparison between now and 20 years ago depends on what sort of college you use, and what sort of grant aid you qualify for.
In the best case–privates with at least average grant aid–it looks like there now may have been no inflation-adjusted increase at all over the last 20 years. In the worst case–full-pay privates–it looks like maybe around 1/3rd of the peak increase has been recently offset.
That was an interesting exercise! This probably helps explain why in social, or social media, circles where a lot of the families are at least looking at full pay for privates, some of them may be less-than-receptive to information about college getting less expensive in inflation-adjusted terms. That has been true recently even for them, but it has done less to offset the prior increases than for other segments of the college market.
Although as pointed out before, at the sorts of income percentiles where families are typically full pay, net increases in incomes have likely met or indeed exceeded the net increase in full-pay college costs. But also as pointed out before, if such a family has either not been saving like the average such family, or possibly if its savings are primarily in the form of net home equity, such a family might still perceive full-pay private tuition as very burdensome despite the recent trend.
So, even a pretty high-income family like that, despite the recent declines in inflation-adjusted full-pay, might still feel like they have to “settle” for in-state tuition, or possibly out-of-state tuition if it is less than full-pay private, unless they can get a lot of merit aid from a private they feel is desirable.
