CBS News recently reported that a number of colleges and universities had or planned to cut their sticker prices significantly. CBS noted that the reported tuition price for independent colleges and universities was slightly over $30,000 per year—or up about $1,100 since last year.
These numbers translated into a 2.9-percent increase or the lowest collective tuition increase in 40 years.
Consumers need to think through a number of points before applauding this decision as a panacea to address high sticker prices.
First, the CBS report confused cost and price. Independent colleges and universities offer approximately $19 billion in aid to current and prospective students. For most students, this lowers the cost of attending an institution. Yet it may not change the sticker price that is typically misrepresented as the cost to attend a college.
Second, students graduate with about $28,000 in debt on average. This level translates into the price of a fully loaded midsize car payment.
While this number is too high, it is still manageable. Students and their families must ask themselves if going to college is worth the equivalent in this example of paying off a new car on very generous repayment terms.
The grossly inflated numbers typically reported in the media in fact are the combination of undergraduate and graduate debt, often the high debt associated with attendance at medical, business and law schools. This is a serious but separate problem.
