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Our knee-jerk tuition fears

My colleague Dan de Vise's new piece about college tuition is the most useful article in the paper. He exposes the persistent distortion of tuition rates by colleges. They appear to think they have a great marketing advantage in inflating their sticker prices---high cost means high quality in the public mind---even if it creates a disabling sense of hopelessness in some families about their ability to send their kids to higher education.

His central statistic is astonishing: based on what private non-profit colleges ANNOUNCED were their tuition, fees and living expenses for this academic year, families are going to have to shell out $35,640 a year on average. But that is a fraud. Those same colleges do so much discounting and scholarship awarding that the actual average cost this year was only $21,200, 41 percent less than they said.

I think that is outrageous. Let's add inflated sticker prices as the sixth blind spot in our higher education system, as revealed by me in a recent Monday column.

Of course, we are partly to blame. We American consumers seem to WANT to believe that college costs more than it does.

A 1998 study by the American Council on Education showed that when Americans were asked to estimate the cost of a year's in-state tuition at a four-year public university, their guess was three times the actual cost.

This misimpression is particularly common among minority parents, who are less likely to have gone to college themselves and encountered the distortions in high ed's sticker price system. The American Council on Education study showed that African Americans were 83 percent more likely than non-Hispanic whites to think college was not affordable. Hispanics were 79 percent more likely than non-Hispanic whites to hold such beliefs.

Does anybody out there think the colleges have any justification for misleading us in this way? De Vise helpfully explains in his piece that the federal government will require all colleges to post a "net price calculator" on their Web sites by 2011 to help families see how much they might actually have to pay based on each college's previous discounting and aid policies for families at various income levels.

That's nice. I can't wait to see how prominently they display these devices, and whether or not those who bury them deep in their sites have any shame.

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By Jay Mathews  | February 10, 2010; 12:04 PM ET
Categories:  Jay on the Web  | Tags:  Americans misinformed about college costs, Dan de Vise, colleges distort their cost, net college tuition, tuition sticker shock  
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A few school have calculators already, e.g. MIT. MIT costs a few thousand total for most minoriites--if you work you'll have $0 in debt. Unfortunately the cheap schools are hard to get into (affirmative action doesn't help much).

Posted by: steve10c | February 10, 2010 3:46 PM | Report abuse

How about: Does anyone think there's anything wrong with a higher education system where a minority of parents "able" to pay the sticker price subsidize the majority who "can't." There are two problems here: (1) We can all be in favor of subsidizing college educations for those in need, but shouldn't this be a general obligation of the body politic, not a forced contribution from a random few? (2)Determining who can and cannot pay involves inescapable issues of (a) honesty in reporting finances, and (b) penalizing parents who have had the foresight to save for college by making them contribute to help parents who haven't. Not that these are easy issues. But the issue you raise is an easy issue: Are there really high school advisors who can't and don't tell parents about the difference between sticker prices and real prices. I doubt it.

Posted by: WilliamIverson | February 10, 2010 5:50 PM | Report abuse

It's not clear to me where you think this money is going. If you believe that colleges/universities are significantly overcharging a large percentage of their students, what is happening to that money?

I think there is a large difference here between public and private schools. The public colleges and universities in Virginia may be wasting some money, but few people are getting rich or living the high life as a result of tuition rates. I don't know about private schools.

Posted by: Jenny04 | February 10, 2010 8:18 PM | Report abuse

You have it backwards, Jay. Price distortion isn't a willful attempt to mislead but a side effect of other policies. As Mr. deVise's article usefully points out, one of the effects of price distortion is that wealthier families subsidize less wealthy ones. In addition, students prefer to think that they are getting financial aid even when they are not; at a Division III college where I used to work, we found that students chose us in part because of the athletic scholarships we gave -- but of course D-3 colleges don't give athletic scholarships! They chose to believe that the need aid we gave was for athletic merit. In this, students are like consumers otherwise: they would rather have a $20 shirt at 50% off than a $10 shirt at full price.

Price distortion can be misleading, sure. But the differences aren't meaningful to the population you describe. If a poor parent is discouraged by the difference between $35,000 and $21,000, why on earth don't they turn to the public options where tuition is less than half that? The only people who are really affected are those whose incomes place them in the top sixth of all American families (about $100,000) -- of course, these families make up most of the Post readership.

There are bigger problems for higher education than financial-aid-related price distortion.

Posted by: drrico | February 11, 2010 8:43 AM | Report abuse

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