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Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
The exorbitant cost of college in the United States is once again in the spotlight. Vanderbilt University made headlines this month after a letter sent to a newly admitted engineering student showed the total cost of attendance would be $98,426 for the 2024 school year- 2025.
The near-six-figure price tag has sparked a new round of debate about the value and affordability of higher education in the United States. The total cost of attending a four-year college nearly tripled between 1980 and 2020, according to data from the National Center for Education Statistics (NCES). This is adjusted for inflation. Schools like Wellesley, the University of Southern California, Boston University and the University of Pennsylvania are all showing costs of more than $90,000 for the upcoming academic year. This compares to the median U.S. household income of $74,580,
Yet focusing on the sticker price may not be the best way to understand the affordability crisis. For starters, prices differ significantly between private and public colleges. New York state residents pay about $7,000 a year in tuition to attend a public university in the state, compared to more than $67,000 a year for Columbia University.
Second, the overall price is the total cost. It includes tuition, room and board, fees, books, transportation and other expenses. Only a small percentage of students actually pay this amount. Thanks to financial aid, which can include merit scholarships, grants and work-study programs, most students pay much less.
After accounting for financial aid, College Board data shows that the net price paid by students at public and private nonprofit four-year institutions is actually lower for the 2023-2024 academic year than from 2006-2007. At Vanderbilt, students whose families have incomes of $150,000 or less pay no tuition in most cases.
Net price is by no means a perfect measure. The net price many low- and middle-income students have to pay is still too high at many universities, especially when compared to some countries in Europe, where college is free or almost free for everyone.
Still, it is a better indicator of the true cost of a college education to a potential student. Finding better ways to report and track net prices would be a first step toward solving the affordability problem. Demanding greater transparency about how colleges calculate their financial aid is another. To combat the student debt crisis, schools should also be prohibited from treating federal student loans as a form of financial aid.
College may not be for everyone. But the decision to go there should be based on accurate price information.