News
As college costs soar, so has discounting, Ron Lieber says
Ivy League architecture at Princeton University.
Loop Images | Getty Images
Often in the form of merit aid, the average tuition discount for first-time, full-time students at private colleges is roughly 56%, Lieber previously reported.
But “all of this discounting … goes on behind the scenes,” said Lieber, who is the author of “The Price You Pay for College.”
‘High-tuition, high-aid’
Over time, there has been a slow shift to a “high-tuition, high-aid” model, where colleges both raise tuition and increase grant aid, according to Emily Cook, an assistant professor of economics at Texas A&M University.
Now, about two-thirds of all full-time students receive some sort of financial assistance, which can bring college costs significantly down.
“The list price is not the actual price,” Lieber said at Friday’s event, which was co-sponsored by the National Endowment for Financial Education.
The net price students and their families pay for college is the tuition cost minus grants, scholarships and other types of aid.
However, “every school calculates aid differently,” said Robert Franek, editor-in-chief of The Princeton Review, “leaving families desperate for transparency and predictability.”
“Tuition discounting is a big part of how this evolved,” Franek said. “Colleges rely on higher sticker prices to fund the aid that brings many students’ costs back down. But the optics are daunting — and for families who don’t yet know their aid package, that six-figure number can feel like a closed door.”
Price is now the biggest consideration among students and parents when choosing a college, according to The Princeton Review. Financial concerns govern decision-making for 8 in 10 families, a report by education lender Sallie Mae also found — outweighing even academics when deciding between schools.
For most college-bound students and their parents, it often comes down to their “ability to pay” and their “willingness to pay,” Lieber said. “Schools are trying to guess exactly where you are on that continuum.”
What is a college degree worth?
Studies show that most people believe the value of a degree still far outweighs the cost.
“A mountain of research shows that college remains a worthwhile investment and the most powerful path to economic mobility,” said Sameer Gadkaree, the president and CEO of The Institute for College Access & Success.
However, many factors — including how much financial aid is offered and how much students have to pay out of pocket, as well as the choice of major, future earnings potential and how long it takes to graduate — determine the actual return on investment, according to a recent study by the Federal Reserve Bank of New York.
The Princeton Review’s Franek advises students and families not to be deterred by the sky-high sticker prices.
Further, “the vast majority of colleges charge far less than six-figure tuition,” Gadkaree added. Although “it’s still difficult for many low- and middle-income students to afford these institutions without taking on debt.”
Subscribe to CNBC on YouTube.
