Here's a smidgen of good news if you've got teenagers heading off to college soon.
In a new report, the College Board said that U.S. public and private colleges and universities are continuing to raise their prices faster than the rate of inflation. So what's the good news? Prices rose more slowly than they have over the past 30 years, the nonprofit advocacy group group.
Perhaps only in the higher-education world can rising costs be spun positively.
"It is encouraging that published prices are rising more slowly than in the past," said Sandy Baum, a professor at George Washington University and co-author of the annual report. But Baum acknowledges that "dramatic increases" in college costs over the last several decades have topped the growth in grant aid to students, leading to growing debt loads for graduates.
According to the latest figures, average annual tuition and fees for in-state students at public universities have risen 2.9 percent for the 2014-15 school year, to $9,139. The tuition/fees for nonresidents at state universities increased 3.3 percent to $22,958. At public two-year colleges, the price jumped 3.3 percent, bringing the average tab to $3,347. Private, nonprofit colleges raised their tuition by 3.7 percent, bringing the new cost to $31,231.
Room and board charges also outstripped inflation, which currently runs just below 2 percent. The average room/board cost for students at state universities is now $9,804, while private schools are charging $11,188.
What a lot of families don't understand is that sticker prices are largely meaningless. About two-thirds of undergraduate students who are enrolled full-time receive a price break in the form of grants and scholarships. Undergrads got an average of $14,180 in financial aid in 2013-2014. The average package broke down this way:
- $8,080 in grants from all sources
- $4,840 federal loans
- $1,195 education tax credits/deductions
- $65 federal work-study
Among all types of institutions, the biggest price hogs are private doctoral universities. Schools in this category include many of the nation's best-known schools, including Ivy League institutions Doctoral research universities raised their tuition and fees by 4.2 percent. These schools are significantly more expensive than the typical masters-level university or college.
The tuition for private doctoral universities is $39,008, compared with $29,404 for private colleges and $27,594 for private master-level universities.
Private research universities don't have to worry about moderating their prices. Elite schools could charge double and still have plenty of takers. The problem for all students is that how these institutions set their prices can raise costs across the higher-ed world.
When the most expensive schools raise their prices, it causes reverberations among thousands of other schools. Schools lower on the academic pecking order judge themselves by what the country's most prestigious and expensive schools are doing. If the elites continue to construct amazing facilities, shrink class sizes and maybe even offer maid service, the wannabes won't want to be left behind.
These schools know they can't catch up to the top college, but they are terrified of losing ground. So they also tend to raise their prices, leading to the current cost spiral that risks taking college beyond the means of many Americans.