Fact-checking the narrative about exploding tuition costs

State budget cuts 'overwhelmingly' drive college, university price increases

Increased spending by colleges is not the cause of rising tuition, argue two economics professors at the College of William & Mary in the Washington Post's "Grade Point" blog.

The Bureau of Labor Statistics' (BLS) college tuition and fees price index back the "conventional wisdom" that the price of higher education is growing rapidly—apparently even more so than medical costs, write Robert Archibald and David Feldman.

The common narrative is that college spending, increased enrollments, and availability of loans has pushed up the price of higher education—a system expected to collapse within the next two decades.

The conventional wisdom may not be so wise

"But a number of big facts don't fit this story," write the duo. They identify two main problems in the traditional narrative:

1. The average net price a student pays is not climbing at the same rate as institutions' list prices.

2. State divestment in public higher education drives much of the rise in tuition.

Report: Lack of state funding, not 'administrative bloat' caused tuition increases

When creating the Consumer Price Index, BLS uses the co-pays and funds health care providers actually receive—not the original "charge' price. But for the college tuition and fees price index, the bureau uses list prices, not what students end up paying.

On average, students pay significantly less than a college's published price, because federal, state, and school grants combined with private scholarships and education tax credits bring down the cost.

"Over time the list price and the net price have diverged quite a bit," write Archibald and Feldman.

While list prices have grown rapidly since 1990, net price of private four-year institutions "has barely budged." Even at public four-year colleges and universities, the average net price remains much lower than the average list price. Although, during the Great Recession the net price grew at nearly the same rate as medical care prices.

States increase higher ed funding, but barely

But from 2001 to 2011, the real per-student cost rose just 0.44% annually, according to College Board data. Meanwhile the real value of per-student state appropriations dropped by about 4% annually.

"The rise in the net price paid by students at public universities is overwhelmingly driven by state cuts, not rapidly rising spending by wasteful public universities," write the pair.

The "real crisis" in higher education is driven by a shrinking middle class, family income stagnation, and state disinvestment from university systems, they conclude (Archibald/Feldman, "Grade Point," Washington Post, 5/13).

The takeaway: The public narrative around rising prices in higher education does not follow the data, according to two economics professors.

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