The Rising Price of a College Education Sandy Baum Michael McPherson Skidmore College & The Spencer Foundation The College Board The College Board College Savings Foundation May 2008

Rising college prices: Not a new story

Average Published Charges for Undergraduates, (Enrollment-Weighted) Source: The College Board, Trends in College Pricing 2007

Average Published Tuition and Fees, Five-Year Intervals, to (Enrollment-Weighted) Source: The College Board, Trends in College Pricing 2007

Variation in Prices

Distribution of Full-Time Undergraduates at Public & Private Four-Year Institutions by Published Tuition & Fees, Source: The College Board, Trends in College Pricing 2007

Tuition & Fee and Room &Board Charges by Region & Sector, in Constant (2007) Dollars, and (Enrollment-Weighted) Source: The College Board, Trends in College Pricing 2007

Tuition and fees don’t tell the whole story.

Average Estimated Undergraduate Budgets, (Enrollment-Weighted) Source: The College Board, Trends in College Pricing 2007

The net price to students after considering grant aid and tax benefits, is a better indicator of affordability than the published price.

Tuition & Fees, Net Tuition & Fees, and Room & Board in Constant (2007) Dollars: to , Source: The College Board, Trends in College Pricing 2007

Full-Time Dependent Student Net Tuition & Fees and Net Cost of Attendance: Percentage of Family Income, and Sources: NPSAS: 1993 and 2004; U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 1992 and 2003; calculations by authors. The College Board, Trends in College Pricing 2007

Full-Time Dependent Student Net Tuition & Fees and Net Cost of Attendance: Percentage of Family Income, and Sources: NPSAS: 1993 and 2004; U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 1992 and 2003; calculations by authors. The College Board, Trends in College Pricing 2007

What is driving the price of college?

Annual Percentage Changes in Educational Appropriations per Public FTE Student and in Tuition & Fees at Public Four-Year Institutions in Constant (2007) Dollars, to Source: SHEEO data, The College Board, Trends in College Pricing 2007

16 Average Annual Percent Change in Median Spending per FTE Student – Publics Average Annual Percent Change in Median Spending per FTE Student – Publics Public Research Public Masters Public Associates Instruction 0.5%0.4%0.6%0.4%1.0%-0.2% Research 3.9%3.2%4.3%3.2%-3.7%1.0% Public Service 5.0%7.2%5.4%3.7%2.1%0.0% Academic Support 2.3%0.1%2.0%0.6%1.0%0.2% Student Services 2.4%0.9%1.3%0.4%2.0%0.3% Institutional Support 0.6%0.9%1.8%1.2%1.3%0.5% Operations and Maintenance -0.4%2.0%-0.6%1.8%-0.3%0.9% Institutional Grants 9.5%7.5%7.6%6.4%6.1%4.6% + Source: The Delta Cost Project, 2008

17 Average Annual Percent Change in Median Spending per FTE Student – Private Institutions Average Annual Percent Change in Median Spending per FTE Student – Private Institutions Private Research Private Masters Private Baccalaureate Instruction 2.2%1.0%1.8%1.3%1.0%0.8% Research 1.9%7.3%2.2%4.9%4.7%7.0% Public Service 3.7%0.4%4.5%-2.0%-2.8%4.5% Academic Support 2.8%2.4%2.1%2.1%1.8%2.3% Student Services 3.5%1.9%3.1%1.8%3.0%2.8% Institutional Support 2.4%1.6%1.2%1.9%1.3%1.1% Operations and Maintenance 2.3%0.9%0.1%0.2%0.4%0.9% Institutional Grants 6.5%4.4%8.6%4.3%8.7%3.1% + Source: The Delta Cost Project, 2008

Prices, Revenue, Spending: % Change to , in 2005 CPI Adjusted $ Sector Type In-State Undergraduate "Sticker" Price Net Tuition Revenue per FTE Direct Instructional Spending per FTE Full Educational Spending per FTE Total E&G Spending per FTE Public Research 45.6%34.6%3.2%0.2%7.9% Public Masters 42.3%36.6%2.7%3.4%-3.0% Public Associates 28.5%34.1%-1.3%0.3%-3.4% Private Research 24.0%16.7%6.9%4.5%17.8% Private Masters 23.5%19.0%9.6%10.9%5.6% Private Bachelors 22.6%16.5%5.9%6.1%4.6% Measures of median spending per FTE student; Delta 19-year matched set. Source: The Delta Cost Project, 2008

19 All measures are mean $/FTE, data source Delta database 19-year matched National Average Full Educational Cost per FTE at Public Institutions, 1998 and 2005 Full Educational Cost per FTE (2005 constant dollars) Source: The Delta Cost Project, 2008

All measures are mean $/FTE, data source Delta database 19-year matched National Average Full Educational Cost per FTE at Private Institutions, 1998 and 2005 Source: The Delta Cost Project, 2008

How are students paying?

Ten-Year Trend in Funds Used to Finance Postsecondary Education Expenses in Constant (2006) Dollars (in Billions), to Source: The College Board, Trends in Student Aid 2007

Growth of Federal, Institutional, and State Grant Dollars in Constant (2006) Dollars (in Billions), to Source: The College Board, Trends in Student Aid, 2007

Growth of Stafford, PLUS, and Nonfederal Loan Dollars in Constant (2006) Dollars (in Billions), to Source: The College Board, Trends in Student Aid, 2007

Average Amount Borrowed (& Percent Borrowing) from Federal and Private Sources, Full-Time Dependent Undergraduates by Family Income in Constant (2006) Dollars, to Sources: NPSAS: 1993, 1996, 2000, and 2004; calculations by authors. U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 1992, 1995, 1999, and The College Board, Trends in Student Aid, 2007

Is it worth it?

Notes: Taxes paid include federal income, Social Security, and Medicare taxes, and state and local income, sales, and property taxes. Sources: U.S. Census Bureau, 2006, PINC-03; Internal Revenue Service, 2006; McIntyre et al., 2003; calculations by the authors. The College Board, Education Pays 2007 Median Earnings and Tax Payments of Full-Time Year-Round Workers Ages 25 and Older, Median Earnings and Tax Payments of Full-Time Year-Round Workers Ages 25 and Older, by Education Level, 2005 by Education Level, 2005

Estimated Cumulative Earnings Net of Loan Repayment for Tuition and Fees, by Education Level Note: Based on median 2005 earnings for each education level at each age and discounted using a 3 percent annual rate. Earnings for bachelor’s degree recipients include only those with no advanced degree. Assumes tuition and fees are financed with borrowing, and loan payments are made for 10 years after graduation. Sources: U.S. Census Bureau, 2006, PINC-03, PINC-04; The College Board, 2005; calculations by the authors. The College Board, Education Pays 2007.

What will the future bring?

Key Variables: Ability to Pay Economic growth Income distribution Demographics

Key Variables: Cost and Price Innovations in instruction Technical change University governance Government subsidies (state and federal)

The Role of Saving Who can save? New saving vs. asset allocation Distribution of tax subsidies (deductions vs. credits)

The Role of Loans Continued reliance Flexible repayment options Higher loan limits