Tuition Transparency Is Still a Problem

When deciding whether to attend college, most people’s biggest concern is how to afford it. Indeed, the cost of attending a particular college is a key factor guiding students’ choices of colleges to apply to, as well as their parents’ choices of what colleges to suggest. However, the actual cost of college is quite hard to understand, as a recent report from the Strada Education Foundation makes clear.

The reason for this confusion is that the sticker price (what a college says it charges) and the amount you actually pay are two different figures. Go to any college’s website, and you’ll likely see a precise figure for what it ostensibly charges, usually split into tuition, room and board, and assorted fees. But after scholarships, discounts, governmental aid, and various other deductions, the average student’s cost is not the sticker price. Often, it is not even close. As a result, it is challenging to know what a college actually costs before you get admitted and see your financial-aid offer.

After scholarships, discounts, governmental aid, and various other deductions, the average student’s cost is not the sticker price. Strada’s report dives deep into this discrepancy, examining how different groups perceive college costs, how accurate their perceptions are, and how this impacts their experiences and choices. The report focuses on public universities, which educate the majority of Americans, and finds that 77 percent of adults consider college generally unaffordable, while 65 percent consider it unaffordable regardless of how badly you want to attend. Yet when these same adults were asked how much they thought college cost, the majority overestimated the real expense. According to Strada, “Only 22 percent of respondents correctly identified that the average student at a public four-year institution pays between $20,000 and $29,999,” and most respondents guessed that the cost is higher than $30,000. The overestimates were highest among those with the least education.

One’s perception of cost influences which colleges one applies to and if one applies to college at all. Why does it matter that people overestimate what college costs? Because one’s perception of cost influences which colleges one applies to and if one applies to college at all. People may choose unnecessarily expensive colleges because they’re unaware of a cheaper option hidden behind a higher sticker price, or they may skip out on college entirely even though they could have afforded it. This is especially true for those with less money, the same people (to the extent that household income and educational attainment align) who are least likely to know the actual cost of college.

Thankfully, a lack of price transparency is a solvable issue. There are even multiple valid and feasible solutions, though three that particularly stand out are tying price transparency to qualification for federal aid, encouraging accreditors to require true price transparency, and promoting better formulas for price calculation.

While not every college relies on federal funding, the vast majority do. As a result, federal funding is a powerful lever with which to nudge colleges to change their policies. By making price transparency a requirement for federal funding and by being explicit about what transparency means, the government can help ensure colleges are honest about their costs. This, in turn, will make college prices clearer to the public.

Another commonly used lever to promote policy change is university accreditation. Not only are unaccredited colleges unable to access federal student loans, but their graduates are also disadvantaged in the job market, which harms the value of the education they offer. The government has significant power over accreditors, which it could use to encourage the inclusion of real price transparency as a condition for re-accreditation.

It is important to note that the government has already tried to enforce price transparency and that universities complied. However, they did so by creating a set of net price calculators that were at best imperfect. Since then, Dr. Phil Levine and others have built better algorithms for calculating the price of college, which have already been adopted by some colleges. By specifying that schools must adopt these new calculators, the government can make transparent prices more accessible to everyone.

College prices differ from what universities say they are, a fact that has adverse effects on the average college-shopping American. The government has the means and opportunity to fix this.

Zev van Zanten is an economics and mathematics student at Duke University.