Despite Tuition Increases, Students Are Paying Less for College
Credit: Viktor Cvetkovic / Getty Images- A new Brookings report shows that college net costs have declined since 2019.
- Tuition continues to increase, but financial aid allocations offset rising costs.
- Only the wealthiest students at highly endowed universities have seen an increase in net costs since 2015.
- Additional taxes on wealthy universities might jeopardize financial aid for low-income students.
Americans have lost faith in higher education. At least that’s what polls tell us.
Last year, Gallup found that only about a third of Americans have “quite a lot” of confidence in the nation’s colleges and universities.
Why? While political agendas and inadequate job preparation top the list of grievances, cost concerns aren’t far behind.
And for good reason. Accounting for inflation, tuition has nearly tripled over the past 60 years. With headlines telling us one year at a private university will run upwards of $100,000, it’s no wonder critics say skyrocketing costs are out of control.
But rising tuition constitutes only part of the story. The real cost of college is what students and families truly pay.
It turns out they’ve been paying less in recent years.
That’s partly because tuition discounts — a percentage of tuition returned to students as financial aid — continue to rise as colleges sweeten the pot to attract students. The national average among private colleges has crested 50%, meaning some institutions are giving away more revenue than they’re keeping.
In fact, at some private colleges, the discount rate approaches 70%.
Although this trend is unsustainable for colleges, it’s good news for students, who pay less as a result.
Public colleges and universities don’t play the same “high tuition, high discount” game, but their net costs have been shrinking as well, says a new Brookings Institution report.
Phillip Levine, an economics professor at Wellesley College and author of the report, combed through data from the College Board and the Federal Reserve’s Survey of Consumer Finances to examine real costs at four types of institutions: flagship and non-flagship publics and private colleges with large and small endowments, choosing 50 of each.
For each institutional type, inflation-adjusted net costs were determined according to annual income and asset distributions in the 25th, 50th, 75th, and 90th percentiles. That ranges from $40,000-$240,000.
Here’s what he found. From 2019 to 2024, sticker prices actually declined in real dollars if not in nominal terms, largely because tuition increases failed to keep pace with skyrocketing inflation.
The more impactful news, however, relates to net costs.
At public flagships, families in the 25th percentile (income of $40,000) saw a net price of $17,600 in 2019. By 2024, it was $15,000. At the opposite end of the earnings spectrum — the 90th percentile, or $240,000 — the net cost dropped from $32,500 in 2019 to $29,900 in 2024.
Meanwhile, tuition among flagships declined from $35,900 to $33,100, adjusted for inflation.
A similar story unfolded at non-flagships — the more regional public colleges and universities — where net prices dropped for students at all income levels.
Among private institutions with smaller endowments ($100,000-$500,000 per student), students in the lowest income bracket saw net costs decline from $26,500 to $21,500, while those from the top bracket saw them decrease from $43,800 to $37,500.
Yet the biggest change occurred at private colleges with larger endowments (over $500,000 per student), where net prices fell almost 41% for students in the lowest income bracket and by more than 43% for those in the next lowest ($80,000).
Even students from families within the highest earnings bracket benefited, experiencing a net decline of 7% during that span.
Levine clarifies his findings to note that high-income students at highly endowed universities pay more than they did a decade ago, but that’s only the exception to this trend, and the increase is only 1.6% above 2015 net costs. By comparison, though, students in the $80,000 bracket have a 35.4% lower cost than their counterparts in 2015.
Courtesy of The Brookings Institution
Despite demonstrating these real gains, Levine hesitates to suggest college is now suddenly affordable.
“Whether or not a student whose family earns $300,000 or more per year can afford a $90,000 price tag is an open question,” he writes. “But at many institutions, families earning $40,000 are still expected to come up with $15,000 to $20,000 per year. It seems clear that amount is not affordable.”
Levine also points out that while the cheapest option for low-income students is among highly endowed schools, where the average net price for them was only $4,400 in 2024, current proposals to further tax the endowments of wealthy universities might reduce the amount of financial aid available to help such students.
But for now, the big headline is that although college prices continue to rise, college costs — what families actually pay — are declining.
Buffeted by an onslaught of political attacks and bad press, colleges and universities certainly have something positive to tout, even if it doesn’t necessarily bode well for the financial futures of many institutions.