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The Cost Of College Continues To Decline

By Derek Newton
Reposted from Forbes, with permission

The actual cost of going to college is much cheaper than it was just ten years.

That’s the headline finding of the newest report from The College Board, a regular survey of prices, actual cost and financial aid at American colleges and universities.

That college costs less than it did a decade ago may be news to you, and it probably deserves some major headline attention. Though it likely won’t get any because too many people take it as a matter of faith that college is too expensive and that it continues to get more and more expensive, year after year after year.

The facts, according to The College Board, are that, “After adjusting for inflation, the average net tuition and fee price paid by first-time full-time in-state students enrolled in public four-year institutions peaked in 2012-13 at $4,230 (in 2023 dollars) and declined to an estimated $2,730 in 2023-24.”

Yes, declined. And not by a few pennies, but by $1,500 per year – a chunky 36%.

Even at private, non-profit schools, The College Board says, “After adjusting for inflation, the average net tuition and fee price paid by first-time full-time students enrolled in private nonprofit four-year institutions declined from $18,820 (in 2023 dollars) in 2006-07 to an estimated $15,910 in 2023-24.”

Yes, declined. By more than $2,900 a year. If you don’t want to do the math, that’s a 16% reduction.

The key to those realities is the word “net.” That’s what people actually pay to go to these schools – the advertised tuition price, minus federal grants, aid and any scholarships or other discounts. So, even if the sticker price at any given school may go up, the scholarships and grants have been going up even more, lowering the net price significantly.

In fact, the increases in grants and aid have been so strong in the past several years that it’s now, on average, essentially free to go to public, two-year community colleges. In fact, though you may not realize it, it’s been that way for some time. “Since 2009-10, first-time full-time in-district students at public two-year colleges have been receiving enough grant aid on average to cover their tuition and fees,” the report says.

And for the record, the sticker prices, the advertised tuition and fees that schools say they charge, those aren’t really going up either. Not really.

The College Board says that in 2023-24, public, four-year, in-state advertised tuition will be $270 more than last year. Four-year, public out-of-state tuition will be up $850. Private, non-profit, four-year schools will advertise tuition $1,600 higher than last year. In order, that’s a bump of 3%, 3% and 4%.

But, “After adjusting for inflation, all these one-year percent changes are negative.” In other words, those increases were less than standard inflation. And, most importantly, before the discounts and aid and scholarship offerings. Which means that, in today’s dollars, college is cheap.

That’s pretty amazing when you consider that getting a college degree is among the best investments anyone will ever make. The earnings benefits of a college degree still hover around a million dollars over a lifetime – that is, over their lifetimes, someone with a four-year degree will make about one million dollars more than someone without one.

And now, getting that million-dollar degree is 15% to 35% less expensive than it was just a decade ago.

The increasing affordability of college and its benefits are true stories we don’t hear nearly enough. But, also in the report from The College Board is a bit of truth about a misleading story we hear all the time.

That story is much like the myth that college costs are spiraling out of control – that student debt is crushing graduates, making life after college untenable and turning a college degree from bankable asset to debt-laden risk.

For some graduates, that may be true. But the more accurate overall picture of student debt is much more benign. According to The College Board, “As of March 2023, 32% of borrowers owed less than $10,000 and 21% of borrowers owed between $10,000 and $20,000 in federal loan debt.” In other words, a majority of student loan borrowers owed less than $20,000 and nearly one-in-three owe less than $10,000. The shocking part about the student loan data in the report is that those borrowers, “held 4% and 8% of the outstanding federal debt, respectively.”

For comparison, the average loan amount for a used car this year is $26,257. You tell me which one you think is the better investment.

Either way, the data show that the numbers we hear frequently about student debt are grossly inflated by a small number of students with crazy-high loan amounts. And most of those are for graduate or professional-level degrees such as law school or medical school or an MBA.

Unfortunately, at the undergraduate level, some schools are obviously driving high student debt. “The share of 2019-20 bachelor’s degree recipients who borrowed $50,000 or more for undergraduate studies ranged from 8% of those who earned their degrees at public four-year colleges and universities to 26% of those who graduated from for-profit institutions,” the report says. That’s right. One in every four graduates from a for-profit college left with at least $50,000 in student debt.

For most students, loan debt is reasonable and well worth the benefits of having earned a degree. While the really high numbers and distorted averages are being driven by future lawyers and investor-driven for-profit schools.

The data are clear – a college degree is highly valuable and is now a greater value than it has been in many years. And, though the challenges of student debt are real, they probably aren’t how you pictured them.

Originally posted on Forbes on November 21, 2023.