Trends in Net Prices by Family Income

I continue my look through newly-released data from the National Postsecondary Student Aid Study by turning to trends in the net price of attendance by family income. The net price, which is the full cost of attendance (tuition and fees, books and supplies, room and board, and miscellaneous living expenses) less all grant aid received, is a key college affordability measure as it represents how much money students and their families have to come up with each year to attend college. This net price can be covered by a combination of savings, work income, and student loans, but it is worth noting that student loan limits for many undergraduate students are far below the net price. This means that many families face challenges in paying for college if the net price is a large share of their income.

The first figure here shows trends (since 2004) in the percentage of family income needed to cover the net price. In 2015-16, 48% of students faced net prices of less than 25% of their family income, 20% were between 26% and 50%, 9% were between 51% and 99%, and 23% of students had net prices greater than their family incomes. The good news is that the distribution of net prices held almost constant since 2011-12 after having taken a jump during the Great Recession.

In the second figure, I break down the percentage of students with net prices higher than their family income by type of college attended. Nearly half of students attending for-profit college were in this category, which is not surprising given the high prices charged by many for-profit colleges and students’ low household incomes. About one in five students attending public and private nonprofit four-year colleges are also in this category. Meanwhile, even 18% of community college students had net prices higher than their family’s income, which is a particular concern as quite a few colleges do not allow their students to take out federal loans.

The 2018 Net Price Madness Bracket

Every year, I take the 68 teams in the NCAA Division I men’s basketball tournament and fill out a bracket based on colleges with the lowest net price of attendance (defined as the total cost of attendance less all grant aid received). My 2017, 2016, 2015, 2014 and 2013 brackets are preserved for posterity—and often aren’t terribly successful on the hardwood. My 2015 winner (Wichita State) won two games in the tournament, while prior winners New Orleans (2017), Fresno State (2016), Louisiana-Lafayette (2014), and North Carolina A&T (2013) emerged victorious for having the lowest net price but failed to win a single game. But at least West Virginia (a regional champion last year) won two games, so maybe there is some hope for this method.

I created a bracket using 2015-16 data (the most recent available through the U.S. Department of Education for the net price of attendance for all first-time, full-time students receiving grant aid I should note that these net price measures are far from perfect—the data are now three years old and colleges can manipulate these numbers through the living allowance portion of the cost of attendance. Nevertheless, they provide some insights regarding college affordability—and they may not be a bad way to pick that tossup 8/9 game that you’ll probably get wrong anyway.

The final four teams in the bracket are the following, with the full dataset available here:

East: Cal State-Fullerton ($8,170)

West: UNC-Chapel Hill ($10,077)

South: Wright State ($14,464)

Midwest: New Mexico State ($10,213)

Kudos to Cal State-Fullerton for having the lowest net price for all students ($8,170), with an additional shout-out to UNC-Chapel Hill for having the lowest net price among teams that are likely to make it to the final weekend of basketball ($10,077). (Also, kudos to the North Carolina system for having two universities in the last eight.)

Additionally, although I didn’t do a bracket for students in the lowest family income category (below $30,000) this year, the University of Michigan has the lowest net price in that category (at $2,660). Although Michigan doesn’t serve that many low-income students, a new program (designed in part by all-star Michigan economist Susan Dynarski) guarantees four years of free tuition for in-state students with family incomes below $65,000. That’s a good step for a wealthy public university to take.

The 2017 Net Price Madness Bracket

Every year, I take the 68 teams in the NCAA Division I men’s basketball tournament and fill out a bracket based on colleges with the lowest net price of attendance (defined as the total cost of attendance less all grant aid received). My 2016, 2015, 2014 and 2013 brackets are preserved for posterity—and often aren’t terribly successful on the hardwood. My 2015 winner (Wichita State) won two games in the tournament, while prior winners Fresno State (2016), Louisiana-Lafayette (2014), and North Carolina A&T (2013) emerged victorious for having the lowest net price but failed to win a single game. However, North Carolina (a Final Four selection for low-income students in 2016) did actually advance to the championship game before getting beaten by pricey Villanova.

I created two brackets this year using 2014-15 data (the most recent available through the U.S. Department of Education): one for the net price of attendance for all first-time, full-time students receiving grant aid and one focusing on students who received federal financial aid with family incomes below $30,000 per year. I should note that these net price measures are far from perfect—the data are now three years old and colleges can manipulate these numbers through the living allowance portion of the cost of attendance. Nevertheless, they provide some insights regarding college affordability—and they may not be a bad way to pick that tossup 8/9 game that you’ll probably get wrong anyway.

The final four teams in each bracket are the following, with the full dataset available here:

All students receiving grant aid

East: New Orleans ($8,867)

West: West Virginia ($10,405)

South: Northern Kentucky ($9,173)

Midwest: North Carolina Central ($9,793)

Low-income students only

East: Florida ($7,024)

West: Princeton ($3,461)

South: Northern Kentucky (5,030)

Midwest: Michigan ($3,414)

A big congratulations to the University of New Orleans for having the lowest net price for all students and to the University of Michigan for having the lowest net price for its (fairly small percentage of) low-income students. And a hearty lack of congratulations to Southern Methodist for having the highest net price for all students ($36,602) and Gonzaga for having the highest for low-income students ($30,166).

The Price and Cost of College Are Different Things

As someone who spends a lot of time thinking about some of the wonkier issues of higher education finance, there are some common statements that just drive me nuts. For example, people who refer to the U.S. Department of Education as the “DOE” (it’s “ED” and the Department of Energy is “DOE”) or pronounce the FAFSA as “FASFA” might as well be screeching their fingernails on a chalkboard. But, as much as those things annoy me, they’re examples of inside baseball at their finest—they don’t affect students, but they’re still deviations from the norm. So I’ll try to hide my grimaces in those situations going forward.

However, I will say something every time someone erroneously refers to the cost of college when they truly mean the price of college, as these are two distinctly different concepts. Here are the definitions of the two terms:

Price: This represents how much money a student and/or their family has to pay for college.

Cost: This represents how much money it takes to provide an education.

With the presence of federal, state, and institutional financial aid as well as direct state appropriations to colleges, the price that many students pay can be far below the true cost of providing the education. On the other hand, due to the tangled web of subsidies present in the “awkward economics” of higher education, some students (such as full-freight international students and master’s students as well as those enrolled in large lecture classes) may be paying far more than it costs to provide their education.

From a policymaker’s perspective, it if far easier to propose bringing down the price of college than the cost of college—even though these proposals have large price tags and finding funding can be difficult. (An exception is so-called “last dollar” programs at community colleges, which often leverage other grant aid sources instead of using much of their own money.) Bending the cost curve is a far more difficult endeavor, as technology generally hasn’t done much to reduce costs (a promising master’s degree program at Georgia Tech notwithstanding) and other options such as increasing class sizes or spending less on facilities frequently run into opposition.

Efforts to bring down the price of college have become increasingly popular over the last several years, but they must be accompanied with a willingness to reduce costs in order for these programs to be financially feasible in the long run. To this point, cost control has remained a distant goal for most policymakers—a perfectly reasonable position given the shorter time horizons of most politicians. Bringing down prices today gets attention, while the crucial step of bringing down costs in the future is nowhere near as exciting.

The 2016 Net Price Madness Bracket

Every year, I take the 68 teams in the NCAA Division I men’s basketball tournament and fill out a bracket based on colleges with the lowest net price of attendance (defined as the total cost of attendance less all grant aid received). My 2015, 2014 and 2013 brackets are preserved for posterity—and aren’t terribly successful on the hardwood. My 2015 winner (Wichita State) won two games in the tournament, while prior winners Louisiana-Lafayette and North Carolina A&T emerged victorious for having the lowest net price but failed to win a single game.

I created two brackets this year using 2013-14 data (the most recent available through the U.S. Department of Education): one for the net price of attendance for all students and one focusing on students with family incomes below $30,000 per year. The final four teams in each bracket are the following:

All student receiving aid

East: Wichita State ($9,843)

West: Cal State-Bakersfield ($5,690)

South: West Virginia ($9,380)

Midwest: Fresno State ($5,599)

netprice_all_2016

Low-income students only

East: Vanderbilt ($6,905)

West: Yale ($3,918)

South: North Carolina ($4,431)

Midwest: Fresno State ($3,835)

netprice_low_2016

A big congratulations to Fresno State and the state of California for winning this year’s edition of Net Price Madness across both categories.

How Colleges’ Net Prices Fluctuate Over Time

This piece first appeared at the Brookings Institution’s Brown Center Chalkboard blog.

As student loan debt has exceeded $1.2 trillion and many colleges continue to raise tuition prices faster than inflation, students, their families, and policymakers have further scrutinized how much money students pay to attend college. A key metric of affordability is the net price of attendance, defined as the total cost of attendance (tuition and fees, books and supplies, and a living allowance) less all grants and scholarships received by students with federal financial aid. The net price is a key accountability metric used in tools such as the federal government’s College Scorecard and the annual Washington Monthly college rankings that I compile. In this post, I am focusing on newly released net price data from the U.S. Department of Education through the 2013-14 academic year.

I first examined trends in net prices since the 2009-10 academic year for the 2,621 public two-year, public four-year, and private nonprofit four-year colleges that operate on the traditional academic year calendar. I do this for all students receiving federal financial aid (roughly 70% of all college students nationwide), as well as students with family incomes below $30,000 per year—roughly the lowest income quintile of students. Note that students from different backgrounds qualify for different levels of financial aid from both the federal government and the college they attend (and hence face different net prices). Table 1 shows the annual percentage changes in the median net price by sector over each of the five most recent years, as well as the median net price in 2013-14.

netprice_jan16_table1

The net price trends in the most recent year of data (2012-13 to 2013-14) look pretty good for students and their families. The median net price for all students with financial aid increased by just 0.1% at two-year public colleges, 1.4% at four-year public colleges, and 1.7% at four-year private nonprofit colleges—roughly in line with inflation. The lowest-income students saw lower net prices in 2013-14 at two-year public colleges (-1.4%) and four-year private nonprofit colleges (-0.5%) and a small 0.4% increase at four-year public colleges.

Even with one year of good news, net prices are up about 15% at four-year colleges and 10% at two-year colleges since the beginning of the Great Recession in 2009, with a slightly larger percentage increase for lower-income students. Much of this increase in net prices, particularly for lowest-income students, occurred during the 2011-12 academic year.

Although some may blame the lingering effects of the recession or reduced state funding for the increase, in my view the likely culprit appears to be changes made to the federal Pell Grant program. In 2011-12, the income cutoff for an automatic zero EFC (Expected Family Contribution, and hence automatically qualifying for the maximum Pell Grant) was cut from $31,000 to $23,000. This resulted in a 25% decline in the number of automatic zero EFC students and contributed to the average Pell award falling by $278—the first decline in average Pell awards since 2005.

I next examined potential reasons for colleges’ changes in net prices. As colleges are facing incentives to lower their net price, they can do so in three main ways. Lowering tuition prices or increasing institutional grant aid would both benefit students, but they are difficult for cash-strapped colleges to achieve.

If colleges want to lower their net price without sacrificing tuition or housing revenue, the easiest way to do so is to reduce living allowances for off-campus students. Colleges have wide latitude in setting these living allowances, and research that I’ve conducted with Sara Goldrick-Rab at Wisconsin and Braden Hosch at Stony Brook shows a wide range in living allowances within the same county. Here, I looked at whether colleges’ patterns of changing tuition and fees or their off-campus living allowance seemed to be related to their change in net price.

Table 2 shows the change between the 2012-13 and 2013-14 academic years in the total cost of attendance (COA), tuition and fees, and off-campus living allowances (for colleges with off-campus students), broken down by changes in the net price. Colleges with the largest increases in net price (greater than $2,000) increased their COA for off-campus students by $1,398, while colleges with smaller increases (between $0 and $1,999) increased their COA by $829. Both groups of colleges typically increased both tuition and fees and living allowances, which together resulted in the increase in COA.

netprice_jan16_table2

However, colleges with a reported decrease in net price between 2012-13 and 2013-14 had a different pattern of changes. They still increased tuition and fees, but they reduced off-campus living allowances in order to keep the cost of attendance lower. For example, the 131 colleges with a decrease in net price of at least $2,000 had average tuition increases of $310 while living allowances were reduced by $610. Some of these reductions in allowances may be perfectly reasonable (for example, if rent prices around a college fall), but others may deserve additional scrutiny.

The net price data provide useful insights regarding trends in college affordability, but students and their families should not necessarily expect the posted net price to reflect how much money they will need to pay for tuition, fees, and other necessary living expenses during the academic year. These metrics tend to be more accurate for on-campus students (as a college controls room and board prices), but everyone should also look at colleges’ net price calculators for more individualized price estimates as the net price for off-campus students in particular may not reflect their actual expenses.

The 2015 Net Price Madness Bracket

Every year, I take the 68 teams in the 2015 NCAA Division I men’s basketball tournament and fill out a bracket based on colleges with the lowest net price of attendance (defined as the total cost of attendance less all grant aid received). My 2014 and 2013 brackets are preserved for posterity, with Louisiana-Lafayette and North Carolina A&T emerging victorious for having the lowest net price without having won a single game.

In 2015, the final four teams standing (based on net price) are:

MIDWEST REGION: Wichita State [WINNER] (net price of $9,039*, 46% graduation rate, 36% Pell)

WEST REGION: North Carolina (net price of $11,994, 90% graduation rate, 21% Pell)

[An earlier version of this post incorrectly had BYU beating North Carolina. My apologies for that error, which has been corrected.]

EAST REGION: Wyoming (net price of $11,484, 54% graduation rate, 24% Pell)

SOUTH REGION: San Diego State (net price of $9,856, 66% graduation rate, 40% Pell)

netprice

All data for the bracket can be found here.

*NOTE: Wichita State has a reported net price of $9,039, but the net prices for each household income bracket are higher than $9,039. Something isn’t right here, but what would March Madness be without any controversy?

Indiana deserves special plaudits for having a net price for the lowest-income students of just $4,632—although the 19% Pell enrollment rate is quite low.

Also, thanks to Andy Saultz for catching an error in the VCU/Ohio State game. Much appreciated!

How to Calculate–and Not Calculate–Net Prices

Colleges’ net prices, which the U.S. Department of Education defines as the total cost of attendance (tuition and fees, room and board, books and supplies, and other living expenses) less all grant and scholarship aid, have received a lot of attention in the last few years. All colleges are required by the Higher Education Opportunity Act to have a net price calculator on their website, where students can get an estimate of their net price by inputting financial and academic information. Net prices are also used for accountability purposes, including in the Washington Monthly college rankings that I compile, and are likely to be included in the Obama Administration’s Postsecondary Institution Ratings System (PIRS) that could be released in the next several weeks.

Two recently released reports have looked at the net price of attendance, but only one of them is useful to either researchers or families considering colleges. A new Brookings working paper by Phillip Levine makes a good contribution to the net price discussion by making a case for using the median net price (instead of the average) for both consumer information and accountability purposes. He uses data from Wellesley College’s net price calculator to show that the median low-income student faces a net price well below the listed average net price. The reason why the average is higher than the median at Wellesley is because a small number of low-income students pay a high net price, while a much larger number of students pay a relatively low price. The outlying values for a small number of students bring up the average value.

I used data from the 2011-12 National Postsecondary Student Aid Study, a nationally-representative sample of undergraduate students, to compare the average and median net prices for dependent and independent students by family income quartile. The results are below:

Comparing average and median net prices by family income quartile.
Average 10th %ile 25th %ile Median 75th %ile 90th %ile
Dependent students: Parents’ income ($1,000s)
<30 10,299 2,500 4,392 8,113 13,688 20,734
30-64 13,130 3,699 6,328 11,077 17,708 24,750
65-105 16,404 4,383 8,178 14,419 21,839 30,174
106+ 20,388 4,753 9,860 18,420 27,122 39,656
Independent students: student and spouse’s income ($1,000s)
<7 10,972 3,238 5,000 8,889 14,385 22,219
7-19 11,114 3,475 5,252 9,068 14,721 22,320
20-41 10,823 3,426 4,713 8,744 14,362 21,996
42+ 10,193 3,196 4,475 7,931 13,557 20,795
SOURCE: National Postsecondary Student Aid Study 2011-12.

 

Across all family income quartiles for both dependent and independent students, the average net price is higher than the median net price. About 60% of students pay a net price at or below the average net price reported to IPEDS, suggesting that switching to reporting the median net price might improve the quality of available information.

The second report was the annual Trends in College Pricing report, published by the College Board. The conclusion the report reached was that net prices are modest and have actually decreased several years during the last decade. However, their definition of “net price” suffers from two fatal flaws:

(1) “Net price” doesn’t include all cost of attendance components. They publicize a “net tuition” measure and a “net tuition, fees, room and board” measure, but the cost of attendance also includes books and supplies as well as other living expenses such as transportation, personal care, and a small entertainment allowance. (For more on living costs, see this new working paper on living costs I’ve got out with Braden Hosch of Stony Brook and Sara Goldrick-Rab of Wisconsin.) This understates what students and their families should actually expect to pay for college, although living costs can vary across individuals.

(2) Tax credits are included with grant aid in their “net price” definition. Students and their families do not receive the tax credit until they file their taxes in the following year, meaning that costs incurred in August may be partially reimbursed the following spring. That does little to help families pay for college upfront, when the money is actually needed. Additionally, not all families that qualify for education tax credits actually claim them. In this New America Foundation blog post, Stephen Burd notes that about 25% of families don’t claim tax credits—and this takeup rate is likely lower among lower-income families.

Sadly, the College Board report has gotten a lot of attention in spite of its inaccurate net price definitions. I would like to see a robust discussion about the important Brookings paper and how we can work to improve net price data—with the correct definition used.

Are Some Elite Colleges Understating Net Prices?

As a faculty member researching higher education finance, I’m used to seeing the limitations in federal data available to students and their families as they choose colleges. For example, the net price of attendance measure (measured as tuition and fees, room and board, books, and other expenses less any grants received) is only for first-time, full-time students—and therefore excludes a lot of students with great financial need. But a new graphic-heavy report from The Chronicle of Higher Education on net price revealed another huge limitation of the net price data.

The report, titled “Are Poor Families Really Paying Half Their Income at Elite Colleges?” looked at the two ways that some of the most selective public and private colleges calculate household income. About 400 colleges require students to file the CSS/Financial Aid PROFILE (or PROFILE for short) in addition to the FAFSA in order to receive institutional aid; unlike the FAFSA, the PROFILE requires all but the lowest-income students to pay an application fee. Selective colleges require the PROFILE because it includes more questions about household assets than the FAFSA, with the goal of getting a more complete picture of middle-income and upper-income families’ ability to pay for college. This form isn’t really necessary for families with low incomes and little wealth, and can serve as a barrier to attending certain colleges –as noted by Rachel Fishman of the New America Foundation.

The Chronicle piece looked at income data from Notre Dame, which provided both the FAFSA and PROFILE definitions of income. The PROFILE definition of family income resulted in far fewer students in the lowest income bracket (below $30,000 per year) than the FAFSA definition. Because Notre Dame targets more aid to the neediest students, the net price using PROFILE income below $30,000 (the very lowest-income students) was just $4,472 per year, compared to $11,626 using the FAFSA definition.

Notre Dame reported net prices to the Department of Education using the FAFSA definition of family income, which is the same way that all non-PROFILE colleges report income for net price. But the kicker in the Chronicle piece is that apparently some colleges use the PROFILE definition of income to generate net price data for the federal government. These selective colleges look much less expensive than a college like Notre Dame that reports data like most colleges do, giving them great publicity. Reporting PROFILE-based net prices can also improve these colleges’ performance on Washington Monthly’s list of best bang-for-the-buck colleges, as we use the average net price paid by students making less than $75,000 per year in the metric. (But many of the elite colleges don’t make the list since they fail to enroll 20% Pell recipients in their student body.)

The Department of Education should put forth language clarifying that net price data should be based on the FAFSA definition of income and not the PROFILE definition that puts fewer students in the lower income brackets and results in a seemingly lower net price. Colleges can report both FAFSA and PROFILE definitions on their own websites, but federal data need to be consistent across colleges.

The 2014 Net Price Madness Tournament

It’s time for my second annual Net Price Madness Tournament, in which colleges which have men’s basketball teams in the NCAA Division I tournament are ranked based on net price in a tournament format. In last year’s Net Price Madness, North Carolina State, North Carolina A&T, Northwestern State (LA), and Wichita State were the regional winners for the lowest net price among students who received any financial aid in the 2011-12 academic year. And the Shockers did go on to advance to the Final Four, so maybe this method has a tiny correlation to basketball success!

Here are the results for the 2014 Net Price Madness Tournament in a convenient spreadsheet that also includes winners for each game, net price by income level, percent Pell, and six-year graduation rates. The regional winners for 2014 are:

East: North Carolina Central University (14): $8,757 net price, 64% Pell, 43% grad rate

Midwest: Wichita State University (1): $8,645 net price, 36% Pell, 41% grad rate

South: University of New Mexico (7): $11,001 net price, 39% Pell, 46% grad rate

West: University of Louisiana-Lafayette (14): $5,891 net price, 35% Pell, 44% grad rate

And here is the full bracket:

netprice_bracket

Congratulations to these institutions, and a big raspberry to the nine colleges that charged a net price of over $20,000 to the typical student with household income below $30,000 per year. Feel free to use these data to inform your rooting interests!

UPDATE 3/17 Noon ET: Mark Huelsman of Demos drew my attention to the oddity that Wichita State’s net price for all students ($8,645) is far lower than the net price for each of the three lowest income brackets (roughly $12,500 to $13,500). I investigated the IPEDS data report from WSU and discovered that 706 of the 721 WSU first-year, full-time, in-state students receiving Title IV financial aid (listed as Group 4) were reported as having incomes below $30,000 in 2011-12; similar percentages existed for the previous two years.

The sample for the full net price number is somewhat different–it’s first-year, full-time, in-state students receiving any grant aid (including the institution, listed as Group 3). This sample has 902 students, 179 more than the previous sample. Comparing net tuition revenue from the two groups, Group 4 had roughly $9.5 million in net revenue in 2011-12 and the larger Group 3 had $7.8 million in net revenue. This is unusual, to say the least, and it is possible that one of the net price numbers listed in IPEDS is incorrect. I’m continuing to investigate this point.