The Real Cost of College Is Flattening as Schools Give More Scholarships

Article Douglas Belkin
Wall Street Journal logo white back ground black lettering

After increasing for decades, the real cost of attending both public and private college is flat and in some cases even declined this year, as colleges compete for fewer students by giving away more scholarships.

If that sounds counterintuitive, it’s because the sticker price for higher education continues to inch up even though fewer students actually pay it, according an annual pricing-trends report by the College Board, a New York nonprofit that administers the SAT and tracks university costs.

“The trends in college financing have changed in recent years,” Sandy Baum, co-author of the 2018 Trends in Higher Education report, said in a statement. Tuition rose rapidly during the four academic years between fall 2007 and spring 2011, “particularly at public colleges and universities,” Ms. Baum said. “Federal expenditures on student aid increased dramatically, helping a growing student population to finance their education. At the same time, students borrowed more and more.”

But since 2010–11, she said, “all of these trends have reversed.”

The average net cost of a year at a four-year public college or university, including tuition, fees, room and board, fell to $14,880 in 2018–19, down slightly from $14,910 in 2017–18. The cost is still $3,400 greater than a decade ago in inflation-adjusted dollars, according to the report.

The net price for four-year private schools was $27,290, up from $27,160 last year. Those figures are based on 2018–19 tuition rates but prior-year financial-aid figures, and will be revised once financial-aid and tax data are released for the current school year.

Behind that decline is a rise in grants—aid schools offer students that doesn’t need to be repaid. Grants and tax benefits climbed to $21,220 this year, up from $13,860 in 2008 (in 2018 dollars) at private schools. At public institutions they rose to $6,490 this year from $4,970 in 2008.

Student debt in the U.S. has reached record levels, making higher education out of reach for many people. In New York City, a program called ASAP is gaining national attention for helping students earn a college degree and escape the burden of loans they would struggle to repay. 

“These grants are one way for private institutions to offer more aid to low-income students,” said Jennifer Ma, co-author of the report. “Schools charge full-pay students more money but give lower-income students more aid as a result.”

Increased grants from schools allowed undergraduates to borrow less from the federal student-loan program; such borrowing declined to an average $4,520 per student in 2017–18 from $5,830 in 2010–11 (in 2017 dollars), according to the report. Federal loans for graduate students ticked up to $17,990 in 2017–18 from an average of $17,340 in 2014–15.

The decline in public-college costs comes as allocations have risen in many states after legislators sharply cut funding during and immediately after the recession. Private colleges, meanwhile, are increasing financial aid as they compete harder to attract students from a diminishing pool of high-school graduates. This demographic drop is expected to accelerate, as falling U.S. fertility rates lead to shrinking numbers of college-ready children for most of the next two decades.

Schools’ diminishing pricing power is causing tremendous stress among many lower-quality schools as their enrollments decline. In July, Moody’s Investors Service reported that private-college closures rose to about 11 a year, roughly double the rate in 2015. Moody’s predicts annual closures will continue to rise to an average of 15 in coming years.

Most vulnerable are a group of about 750 small, private colleges that depend almost entirely on student tuition because they have small endowments, according to Moody’s. The median net revenue per student among these schools covered 53% of the cost of each student. In 2012, it covered about 65%. The result: about one in five small private colleges is in trouble.

Write to Douglas Belkin at: