Higher Education: Is the Cost Worth the Payoff?

The issues of college costs and rising student debt have fueled a national debate about the value of a college education. A new study by the APM Research Lab found that 72% of Americans are in support of free tuition at public colleges and universities. Yet regardless of the cost—and who pays it—most Americans still feel that higher education is worth the price.

Behind the Sticker Shock: College Costs in Perspective

The numbers are enough to rattle the bank accounts of even financially comfortable families. Ivy League bastion Harvard College will charge $69,607 for the 2019-2020 academic year. That figure includes tuition, room and board, and fees. Yale estimates its cost of attendance for the coming year at $72,100. These totals exclude amounts for books and other personal expenses.

Elite schools aside, the sticker shock of attending college is still very real. Nationwide, the average cost of one year at a private four-year college was $48,510 for the 2018-2019 academic year, while four-year public colleges came in at $21,370.

The high cost of college is nothing new. Tuition and fees have been increasing steadily since the 1980s, and according to the College Board’s data, between 1988 and 2019 tuition costs at four-year private colleges has doubled.

Key Cost Drivers

What are some of the trends triggering costs?

• Supply and demand. According to the National Center for Education Statistics (NCES), U.S. college enrollment surged by 27% between 2000 and 2017.
• Cuts in public funding since the Great Recession. While state and local funding levels have been recovering in recent years, dollars spent per student are lower now than they were a decade ago. As states provide less, colleges look to replace lost revenue by raising tuition.
• Availability of financial aid. Some experts believe that the increase in financial aid correlates to an increase in college costs. The decades-old theory, recently explored in a report by the Federal Reserve Bank of New York, suggests that for every dollar of financial aid disbursed by the government, schools may raise their tuition by as much as 60 cents.

Published vs. Net Price

But there is more to the story than the so-called published costs. These amounts are based on the full price that colleges list in their admissions documentation—and that only the wealthiest families are asked to pay. Dig deeper into the numbers and you will find that the majority of students pay nowhere near the published costs. Instead, most qualify to receive some form of financial aid that brings the total cost down to a more manageable level. This dollar amount is referred to as the net price.

For example, according to the College Board’s calculations, after accounting for financial aid and tax credits, the average student at a four-year private college paid tuition, room and board, and fees of $27,300 in the 2018-2019 school year. This is a far cry from the published price of $48,510. Similarly, the average student at a four-year public college paid an average net cost of $14,900, which is significantly less than the published rate of $21,370.

Assessing the Value

So how do you measure the value of a college education to individuals and society? According to the College Board’s “Education Pays” report, individuals with a bachelor’s degree:

• Earn 67% more than high school graduates.
• Are about half as likely to be unemployed as are high school graduates.
• Are more civic-minded:
• More than twice as likely to volunteer their time (39% vs. 16%).
• More than twice as likely to vote in national elections (45% vs. 20%).
• Are more involved in their children’s activities.

But beyond the numbers, perhaps the most telling statistic of all is that despite the cost, the sacrifices, and the student debt, most Americans still believe that college is worth the investment.