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Can college pricing be fixed?

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Today’s college prices can easily cause sticker shock. Annual published tuition at top-ranked institutions regularly tops $55,000, and it’s not unusual for public flagships to list out-of-state undergraduate tuition at $25,000 or more. 

Those are eye-popping numbers when median U.S. household income is less than $68,000 and families need to pay for non-college expenses. Yet only the wealthiest students pay these sticker prices, as many institutions offer hefty unfunded financial aid packages in a practice called tuition discounting. But few students and their families know how much college will actually cost them when they apply, leading some to forgo applying to institutions that they may be able to afford. 

Phillip Levine, an economics professor at Wellesley College, argues that the opacity of college pricing hurts both families and institutions in his new book, “A Problem of Fit.” 

Ideally, students would go to the institutions that are the best fit for them, Levine said. 

“Some people are good fits for Ohio State or four-year public institutions. Some students are great fits for community colleges,” Levine said. “But if the reason why all the people are falling into the categories that they’re in is because of pricing and a misunderstanding of pricing, that’s a problem.” 

Institutions also aren’t happy with this system. Top-ranked private colleges worry they aren’t enrolling enough low-income students, while their less-selective counterparts are forced to offer merit aid to attract students. Public institutions worry that they’re missing out on students who are going to community colleges. And two-year schools are concerned about the prospective students who are thinking about forgoing college altogether because of the perceived costs. 

“There are all these misallocations of students,” Levine said. 

Higher Ed Dive spoke to Levine about what prompted the book, what he learned while researching college pricing and what can be done to improve the system. 

This interview has been edited for clarity and brevity. 

HIGHER ED DIVE: Was it your own personal experiences that drove you to write this book?

Phillip Levine

Wellesley College

 

PHILLIP LEVINE: A little bit. I’m an economist — I make a pretty good living — and I’ve been saving for college since the day that my kids were born. But as they were getting to be about 12, 13, 14, I just wanted to know whether I had saved enough money, and that required knowing what college was really going to cost me.

I wanted to know whether I was eligible for financial aid, and I realized that essentially that was an impossible question to answer. That’s what started a very long process for me. I realized that if this was a problem for me it has to be a problem for other people. I have a Ph.D. in economics. I’m really good at working with numbers and figuring things out, and I couldn’t figure it out. 

What are some of the most common ways institutions are making that information difficult to understand? 

The system itself makes it difficult for families to understand. The only number the federal government requires institutions to report is something called the cost of attendance, which is the full level of tuition, plus room and board and assumed values of other expenses — the toothpaste, the books and stuff like that. 

It’s just that the vast majority of students don’t pay that price. The way that I like to think about it is that it’s the maximum cost of attendance. On a public university’s website, $30,000 is not an uncommon number. For the private elite institution, $80,000 is not an uncommon number. Most students aren’t paying those amounts, yet that’s the number everybody has in their head. 

There’s been some recognition that that’s a problem. In 2008, there was an amendment passed to the Higher Education Act that required all colleges and universities to institute net price calculators. It’s a tool designed to help you figure out what college will cost, given your circumstances, and that’s great. 

It is a very well-intended intervention that just in practice didn’t work out very well. These tools typically require people to enter information that’s hard for them to enter. They ask you about your tax information. People don’t like taxes. As soon as you start asking them about taxes, you lose them, so these tools tend not to be terribly successful. 

Who do these issues affect the most? 

Clearly, this is more of a problem for lower-income students who think what might be the cheapest option isn’t the cheapest option. Or who think something they can afford is something they can’t afford.


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