"LOOK BEYOND THE STICKER PRICE WHEN CHOOSING
A PRIVATE COLLEGE OR UNIVERSITY"
SEPTEMBER 2, 1014
The United States government's official statistic for college-tuition inflation has become somewhat infamous. It often appears in the media as bad news and policy makers lament that fact that college costs are rising sharply. College tuition and fees have risen 107 percent since 1992, even after making adjustments for inflation, according to this measure.
However, this government measure is very misleading, particularly for private colleges and universities. For years, this measure has been based upon the list price that institutions publish, rather than the actual amount that students and their families pay. The government ignores financial aid grants. The measure tracks what a very small percentage of families pay for students who do not qualify for any type of financial aid, either based upon need or achievement.
You can think of it as the Kohl's scenario, in honor of the large clothing and household retail store where it appears as if all items are permanently on sale. This is where my wife commonly shops (sometimes I join her), and she never pays the "sticker price" because of special sales and discounts.
The good news is that the Bureau of Labor Statistics has gradually started to change its methods to capture the effects of financial aid, but it does not alter the historical data which appears to show college costs spiraling out of control.
The next time you hear somebody say that the cost of a private college education for one year is $20,000, $30,000, $40,000 or even $50,000, remember financial realities. This is only for the student who does not qualify for financial aid, which is a very small percentage of the student population. Private colleges and universities will work very closely with prospective students and their parents to make the higher eduction experience possible. In fact, it is not unusual for private institutions to offer internal scholarships (academic, leadership, athletic, need) to the tune of 35-40 percent of the total cost, commonly referred to as the discount rate.
Taking into account financial aid, some of which comes from the federal and state governments and almost always comes from the colleges themselves, the average tuition an fees were $12,460 at private institutions last year and $3,120 for in-state four-year public institutions, according to the College Board. At those prices, college is an investment with an excellent return for the vast majority of students who graduate.
The College Board further reported that the net tuition and fees at private colleges and universities have risen 22 percent since 1992. The increase has been 60 percent at public four-year colleges, largely because of reductions in state funding. These numbers are obviously quite different from the government's index showing a 107 percent increase.
When prospective students or parents experience surprise at the "sticker price" of a private college education, remember that the net cost is probably considerably less. A college education is worth the investment!
Larry j. McKinney
Higher Education Consultant