College Affordability: Why College Costs Aren’t Skyrocketing

Sensationalist stories all over the mainstream media repeatedly tell us that college costs are skyrocketing. After all, that’s what CNN says, and so does CNBC.

In fact, that’s a preposterous assertion. Not only are college costs not out of control, but they are actually much more affordable than typically presented in public discussions and the mainstream media. Prospective students thinking about enrolling in online or on-campus programs deserve a clear and concise explanation of this discrepancy, like the one that follows.

The mainstream media almost always focuses exclusively on the wrong price for comparing and tracking college costs—a price that few students pay.

They focus on a four-year college’s official price estimate of the total expenses required by one of its undergraduates to pay for a nine-month academic year of full-time study in a residential program on campus. These expenses typically include essentials like tuition and fees, room and board, textbooks and courseware, a late-model laptop computer, a smartphone, educational supplies, personal costs, and transportation to and from campus. A college publishes this estimate in its promotional materials and on its website and distributes it to prospective students in acceptance letter packages.

The expenses that colleges must include when calculating this price estimate are carefully controlled because they’re specified by federal law. The statutory term for this annual estimate is the cost of attendance, or COA, an amount that all baccalaureate-granting colleges and universities that receive Title IV federal financial aid funding have been required to publicly report since October 2011. Colloquially this published estimate is known as a college’s “sticker price,” similar to the price listed on a new car’s window sticker on a dealer’s showroom floor.

These college sticker prices cost tens of thousands of dollars annually, and substantial increases in such prices have become common during the past few decades. In fact, the average sticker price across America for all colleges, both public and private, soared by 70 percent during the 25 years between 1995 and 2020.

These increases continue to be the subjects of countless perennial “evergreen” stories in the media that never cease to attract widespread outrage. A good example is this 2024 New York Times story about the first college in the country to quote a nearly $100,000 cost of attendance, Vanderbilt University in Nashville.

But the full sticker price should matter far less to the vast majority of students and their parents than the net price. That’s the remaining amount a student actually needs to pay to attend their college after deducting “grant-based” financial aid, support that wouldn’t include student loans or subsidized work-study jobs.

Only about 35 percent of Vanderbilt’s admits will pay that full price. And as the Times’ personal finance columnist Ann Carrns points out, indignation over all the soaring sticker prices obscures a key fact that many families don’t recognize: few students pay the full price. Most students pay net prices that are substantially lower—and many pay less than half their school’s sticker price.

That’s especially true of private nonprofit colleges and universities. On average, during the 2022 academic year, these schools discounted sticker-price tuition by about 56 percent for first-time undergraduates and about 51 percent for all undergraduates, according to this report by the National Association of College and University Business Officers (NACUBO). The report points out that 91 percent of first-time undergraduates at those schools received institutional grants and that aid paid an average of 62.1 percent of the sticker-price tuition and fees. 

Moreover, during the last academic year of 2019-2020, before the pandemic, only the wealthiest 26 percent of in-state public college students and 16 percent of students at private nonprofit institutions paid the full sticker price; since 1995-1996, those proportions sharply fell from 53 percent and 29 percent, respectively. In other words, 74 percent of state university students and 84 percent of private college students won financial aid during 2019, so they didn’t need to pay the full sticker prices.

Dr. Phillip Levine, a Wellesley College economics professor, published an April 2024 study for the Brookings Institution, concluding that almost all college students and their families would be better off if they ignored sticker prices altogether. He writes that “our current system of setting and communicating college prices simply does not work,” and that the sticker price has become an “increasingly poor indicator of college prices for all students, regardless of family income.” Because the sticker price has become disconnected from the amount that students actually pay, “the practice of tracking it should be exercised with extreme caution,” Dr. Levine writes.

One reason is that these days, most lower- and middle-income students pay net prices that are much lower than sticker prices. For example, this analysis shows how, at public flagship institutions charging about a $30,000 sticker price, students from families in the bottom 25 percent of the income distribution would only pay a net price—including work study jobs and loans—of less than half that sticker price.

Dr. Levine argues that lower- and middle-income students pay so much less than sticker prices because financial aid has become so widely available in recent decades, especially because of a surge in merit-based scholarships and grants. The proportion of students awarded financial aid has steadily increased since the mid-1990s, making college much more affordable for many. And in marked contrast to the relentlessly climbing sticker prices, College Board data shows that average net prices across the nation not only stabilized, but actually fell during the past two years.

For example, inflation-adjusted sticker prices increased by about 27 percent at both public and private institutions from 2006 to 2020. The sticker prices then declined by about seven to eight percent in the following years because inflation was higher, yielding an overall increase in sticker prices of almost 20 percent starting in 2006.

But what about the inflation-adjusted average net prices paid by the lower- and middle-income students? The net prices also rose until 2020—but much less than the sticker prices. Among four-year colleges from 2006 to 2020, average net prices climbed by only 13 percent at the public institutions, and a mere seven percent at the private institutions.

However, during the most recent period following the Covid era, those increases reversed—and the average net prices plummeted.

That effect indicates this crucial fact: adjusted for inflation, the overall average net prices have not changed compared to the 2006-2007 academic year. Far from “skyrocketing” as CNN claims, during 2024, these net prices paid by as many as 84 percent of undergraduates returned to their substantially lower baseline levels 18 years ago.

The reasons why colleges in the 1980s started to adopt this bifurcated pricing strategy, with discounted high sticker prices, are complex. Marketing probably played a large role. By inflating their sticker prices well above costs, some colleges started to offer substantial discount subsidies packaged as grants and scholarships, leading potential applicants and key stakeholders to perceive the institution as more generous and accessible.

According to Scott Galloway, a marketing professor at New York University, many colleges also position their programs in the higher education marketplace using strategies similar to those used to promote luxury goods. In such markets, high prices typically signal luxury brand attributes that many college students and their parents want, like exclusivity, prestige, and high quality. As Carrns notes, colleges additionally tend to give generous tuition discounts and scholarships as forms of “merit aid” to attract students from affluent families who are capable of paying high sticker prices but resist doing so.

Dr. Levine argues that students would benefit without harm to the schools if all colleges cut their sticker prices instead of awarding discounts. But unless all schools did that, it would set up a well-known social psychology and game theory predicament known as the “prisoner’s dilemma:”

They do not do so because they face a “prisoners’ dilemma.” If any one school changed their policy on its own, it would lose students. If all agreed to do so simultaneously, that would overcome the problem, but it also likely would be seen as a violation of antitrust laws.

Colleges and universities can find themselves especially vulnerable to such antitrust challenges. For example, in October 2024, 40 elite private universities were sued in federal class-action litigation alleging a 20-year conspiracy in restraint of trade under the 1890 landmark antitrust legislation known as the Sherman Act (15 U.S.C. §§ 1–7).

Briefly, the schools allegedly agreed they would require asset and income disclosures by noncustodial divorced parents, even though those parents don’t financially support their applicant son or daughter—a policy that would boost family contributions and reduce financial aid awards. Curiously, at about the same time that complaint was filed, many of the same schools had also introduced free tuition offers for low-income students for the first time in their histories. For more on this unique case and the remarkable tuition offers, see our 2025 article “Free Tuition Offers Announced by More Top Universities.”

Recent net price research has revealed several related findings that are surprising because they seem so counterintuitive. Here’s one of those reports.

A 2023 survey by the Baltimore higher education consulting firm Art & Science Group revealed that about half of a nationwide sample of high school seniors interested in four-year degrees decided against applying to certain colleges based solely on their perceived high sticker prices. These students weren’t interested in any other data about the schools—including their likely financial aid awards that could reduce or eliminate their sense of “sticker shock” in response to their perceptions of the schools’ high published prices.

This curious effect, where students ruled out colleges because of high sticker prices alone, has been known since 2012 through a series of research projects. That year, an earlier Art & Science survey conducted with the College Board revealed a similar result. Plus, another survey in 2013 by Longmire and Company found that 44 percent of public-college-bound students said they rejected colleges based only on published sticker prices. A 2016 study of high school students by Sallie Mae also reported similar findings.

Incredibly, in the latest Art & Science study, the seniors from lower-income families and first-generation college applicants were the least likely to invest any effort in researching that crucial value. And that effect held even though those students benefitted the most from learning a college’s real net price.

Less than a third of the lower-income sample was even willing to glance at an online net cost calculator, let alone ask a college’s financial aid staff about the true, lower charges. Those on track to matriculate as first-generation college students were even less likely to have taken those steps than the lower-income students, with only 22 percent having used a cost calculator and a mere 18 percent having spoken with financial aid staff.