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SUMMARY

INTRODUCTION

TRENDS IN COLLEGE TUITIONS SINCE 1970

• Changes by Sector and Type of Institution
• Changes in Tuitions in the Public and Private Sectors
• Changes in Tuitions by Type of Institution Within Each Sector
• Changes in the Distribution of Enrollments and Their Effects on Average Tuition
• Enrollment Patterns Since 1970
• Effects of Changes in the Distribution of Enrollments on Average Tuition

TRENDS IN STUDENT AID AND THEIR EFFECTS ON NET COLLEGE PRICES

• Student Aid Since 1970
• Issues in Determining the Net Price Paid by Students
• How to Value Different Types of Student Aid
• Limitations of the Data
• Trends in Net College Prices Since 1970

Students, parents, policymakers, and others have focused considerable attention in recent years on the rising price of attending college and on how these higher prices affect the ability of families to pay for college. Most of these discussions have examined the prices charged by institutions of higher education rather than the prices actually paid by students and their families. The prices that students pay for college equal the prices charged by institutions minus student financial aid--referred to here as "net prices." This paper analyzes changes in tuition and fees charged by institutions of higher education as well as changes in tuition and fees paid by students and their families, after adjusting for student financial aid.

Between 1970 and 1986, average tuition and required fees for full-time-equivalent undergraduate students increased substantially in real terms--that is, when adjusted for inflation. Average undergraduate tuition fell slightly in real terms during the 1970s but increased substantially in the 1980s. If the distribution of student enrollments had not shifted during this period--especially if the increase in the proportion of students attending two-year institutions had not occurred--average tuition would have risen more rapidly between 1970 and 1986 than it actually did.

The growth pattern of average student aid for full-time-equivalent students was quite different from that of tuition. Between 1970 and 1980 when average tuition declined in real terms, real student aid--from all federal, state, and institutional sources--increased. Between 1980 and 1986 when tuition rose more quickly than inflation, real student aid declined. As a result, in the 1970s the average real net price paid by students and their families declined by a greater percentage than real tuition. Between 1980 and 1986, however, the average net price paid by students and their families grew more rapidly than tuition.

When federal aid that is available only to specific groups of students--Social Security student benefits and Veterans' education benefits--is excluded, the pattern of growth in financial aid is somewhat different than when all aid is included. Average aid that is generally available also rose in real terms throughout the 1970s; between 1980 and 1986, however, this aid increased further, whereas all aid declined. As a result, when only generally available aid is considered, the average real net price paid by students and their families also fell more rapidly than real tuition during the 1970s. In the 1980s, however, the average net price grew at roughly the same rate in real terms as average tuition. Under all definitions of aid, both average net price paid by students and their families and average tuition charged by institutions were greater in real terms in 1986 than in 1970.
 

INTRODUCTION

This paper examines how certain costs of attending college have changed since 1970. In particular, it analyzes changes in the average tuition and fees charged by institutions of higher education and the average tuition and fees paid by students and their families, after accounting for financial aid. The price that students actually pay to attend college--stated tuition and fees minus student financial aid--is referred to here as "net price." Because shifts in the proportions of students attending institutions with different charges affect the average college price, the effects of such changes on the trends in average tuition charged by institutions also are examined.

The analysis presented here does not examine changes in the actual costs to the institutions of providing the education. College tuition is substantially less than the costs of providing the education because part of these costs are met through other funding sources, such as federal aid, state appropriations, and endowments. Furthermore, changes in tuition and related fees do not necessarily reflect changes in the total costs of education, and vice versa. The paper also does not examine the opportunity cost of education--that is, the earnings students could have obtained if they had not attended college but instead had worked during those years.

This analysis focuses on average college tuition and fees and the average net price paid by students. Because averages do not necessarily indicate the experience of subgroups or individuals, however, some students face tuitions and net prices that are quite different from those presented in this paper. For example, the net price for students who do not receive any financial aid is the same as the institution's tuition, whereas the net price for students who receive large amounts of aid is below the tuition at their institution.

College tuition and student financial aid generally are measured here in real terms--that is, after adjusting for inflation. Focusing on real rather than nominal prices indicates the extent to which the price of college has changed relative to the average price of goods and services in the economy. If college tuition increases at the same rate as inflation, then it remains constant in real terms; when tuition falls or increases less rapidly than inflation, the real price declines; and when tuition rises more rapidly than inflation, the real price increases.

A commonly used index for adjusting for inflation is the Consumer Price Index (CPI), which reflects changes in living costs. In the late 1970s, problems arose with the way the CPI measured housing costs, which resulted in overestimates of the changes in living costs. In 1983, the Bureau of Labor Statistics adopted a revised method, known as the CPI-X1, to calculate the CPI. Although most analyses of changes in college tuition use the unadjusted CPI to adjust prices for inflation during the years before 1983, this analysis uses the CPI-X1 for the entire 1970-1986 period.¹

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1. For a further discussion of the differences between the two measures, see Congressional Budget Office, Trends in Family Income: 1970-1986 (February 1988), pp. 6-9.