Finally, some welcome news about college tuition
Here's a fact about college tuition that may ease the worries of parents and students about to enroll in a bachelor's degree program: There's the sticker price, and there's what people actually pay.
The good news now is that private colleges and universities are discounting their sticker price at record-high rates, according to a recent survey of 411 private nonprofit institutions by the National Association of College and University Business Officers (NACUBO). On average, full-time freshmen received a price break of 49.1 percent, compared with 38 percent in the 2005-06 academic year.
Discounting reflects the financial aid provided by a college to students and their families, which can be based on financial need or merit.
Why are colleges increasing their discounting? It's a result of demographic and economic pressures, according to Ken Redd, director or research and policy analysis at the organization. Many families still haven't recovered from the Great Recession, given stagnant or falling pay for almost all but the richest Americans. At the same time, the population of 18- and 19-year-olds has declined from its 2011 peak, which means the same number of institutions are pursuing a smaller number of college-age young adults.
"We've been doing our survey for roughly 25 years, and what we found over that time period is that for the most part, the discount rate was stable. But that changed with the Great Recession," Redd said. "There's a greater need for financial aid since a lot of families haven't recovered from that."
Median family income rose 5.2 percent to reach $56,500 in 2015, representing the first annual increase for American families since 2007, or before the recession started, according to the U.S. Census Bureau. Yet at the same time, annual tuition for a four-year private college jumped 27 percent to $33,480, according to the College Board.
However, very few college students are actually paying full sticker price, Redd said. His association's survey found 88 percent of first-time freshman receive some type of institutional grant that decreases their bills.
"Only about 12 percent of students pay full tuition price," he noted.
Colleges are offering steeper price discounts because most are suffering from declining enrollments, which may push them to offer aid packages to lure students from rival colleges.
Even with discounts, many families may struggle to justify an expensive private college education for their children. Even though college graduates far outearn workers with only high school degrees, some researchers are adding to questions about the value of higher education.
The average return on a college education is falling. Students who enroll in 2030 will have to wait 11 years to break even on their investment, according to a 2015 report from Goldman Sachs (GS). The investment bank warned that college degrees in the arts, education and psychology have a high risk of a "negative return," as do diplomas that less-prestigious institutions confer.
Graduates from the bottom 25 percent of colleges earn less than high school graduates, the Goldman report found.
Yet a college degree in the STEM fields -- science, technology, engineering or mathematics -- typically are tied to higher lifetime earnings. Researching the quality of a school, as well as what graduates in a specific field typically earn post-graduation, can help inform the decision about which college to attend.
Tuition that outpaces the rate of inflation may be a thing of the past, at least for the near term. Because of financial pressure to discount their tuition rates, colleges had net tuition revenue growth of only 0.4 percent this academic year, the NACUBO found. That's lower than the current inflation rate of about 2 percent.
"It's essentially a decline in inflation-adjusted value," Redd said. "The levels of discounting they are undertaking may not be sustainable."
That may pose operational troubles ahead for some colleges. Still, the higher discounting is good news for families and incoming students, he added. "There's a 9 in 10 chance that those students will get some level of financial aid," Redd noted, "and it could be half of listed tuition price."
for more features.