From 1995 to 2015, private school tuition and fees rose 179 percent, while the inflation rate increased by 55.1 percent in the same timeframe. This data was based on the schools listed in the U.S. News Best Colleges. Tuition and fees at public universities increased at an even higher rate. In-state tuition and fees increased by 296 percent and out-of-state tuition and fees rose 226 percent. With financial aid, the vast majority of students won’t actually be paying the full listed price to attend the college of their choice. The listed cost of attendance is used as a way for colleges to attract the best students. Despite the massive increase in college tuition, the actual amount most students pay is often far less than the listed tuition, which is purposely set very high to be used as a recruiting tactic.
The rising cost to attend college is a popular talking point among prospective high school students and their parents. Politicians often make promises to lower the cost to attend college and some even have advocated for college to be entirely free to attend. While college tuition and fees have dramatically rose over the past twenty years, far outpacing the rate of inflation, it is important to differentiate between the listed cost of attendance and the actual amount students will actually pay to attend the college of their choice. When the data says that private school tuition and fees has risen 179 percent in the last two decades, those numbers are based on the listed cost of attendance. When adjusted for inflation, the actual cost of attending college has not risen much over the last decade. In 2013, the average actual cost of attending a private, non-profit college is around 57 percent of the listed price, which is actually 11 percent less than it was in 2003, according to a report by the College Board.
While private colleges often have very high sticker prices, they are also the schools that offer the most generous financial aid packages. The College Board report stated that the average actual price students paid to attend private, nonprofit colleges was $23,000. This number included the cost of tuition, fees, room and board. This comes out to a similar amount to the sticker price of public universities. Private schools haven’t done a very good job of advertising the fact that the cost of attendance listed on their websites is very unlikely to be the amount the average prospective student will be paying if they chose to attend the school. This poses a big problem in that many talented students who do not come from privileged backgrounds will often not even consider the possibility of attending a private college due to the cost of attendance.
So why do private colleges list on their websites the “absolute highest amount you would possibly pay to attend this college”, instead of the “after you get a ton of financial aid, this is what you will likely pay” amount. For one, I’d imagine they have to list the full price for legal reasons. They don’t want to list the “probable cost of attendance” and then for many students, who will be paying more will feel like they were mislead. The bigger reason is that the listed price helps schools attract the students they really want. Using the psychology of discounts, the higher the listed price, the bigger the discount the schools can offer. Lets say there was a car that cost $50,000, but the salesman offered the car to you at $30,000, which is a discount of 60 percent. If a similar performing car cost $30,000, but was not discounted, you are more likely to choose the discounted car, even though the cost and performance are nearly identical.
The cost of college has been rising for some time, but the actual cost of attendance has remained stable over the past decade when you factor in financial aid. Private colleges have deliberately set listed costs of tuition and fees much higher than the average actual cost of attendance to attract certain students. They use the psychology of discounts and the allure of expensive private institutions to recruit and attract prospective students.