The true cost of college and reasons for it

A general view during the college commencement ceremony for Westminister College on June 1, 2013 in Salt Lake City, Utah.

President Obama is on a bus tour today in New York. One goal of the trip is to spread the word about his new plan for lowering the cost of higher education. He wants to tie federal aid to a new ratings system. Instead of basing aid on the number of students enrolled, it would take into account data on graduation rates, tuition costs, student loan debt and even how much money graduates make after they leave school.

 But let’s start with this basic question: Has federal aid money made college tuition more expensive? “Virtually all of the research that has been done suggests it has not,” says David A. Longanecker, president of the Western Interstate Commission for Higher Education. One exception: "Particularly at the for-profit institutions,” Longanecker says.

The list price at both private and public universities has risen much faster than median income, according to higher education economist Robert B. Archibald. But “net price, when you factor in financial aid, has not gone up nearly as much, though I think still faster than median income,” he says.

It’s important to point out that 75 percent of students attend public universities and colleges, where financially pressed states have been raising tuition faster than private universities.

“If the federal government really wanted to directly affect the problem of state finance for higher education, the single most effective thing they could do is to get the cost of state Medicaid programs down,” says Jane Wellman, executive director of the Delta Project on Postsecondary Costs.

She says public college tuition is going up because rising health care costs from Medicaid are consuming state dollars that used to go to education. This is an issue that the president’s new plan doesn’t address. 

About the author

David Weinberg is a general assignment reporter at Marketplace.

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