Net price of college far less than sticker price in catalogue
Originally published July 18, 2004 in The (Monroe, La.) News-Star
The news recently has been filled with articles about rising tuition and fees, not only in Louisiana but nationally. Congress even held hearings on the subject of the escalating costs of college. Last year alone the average tuition increase at colleges and universities across the country averaged 11 percent.
The tuition increase in Louisiana was only 3 percent last year and this year, but a 4 percent operational fee was added for the 2004-2005 fiscal year to close the gap between mandated costs and state appropriations.
On the other hand, in May the Christian Science Monitor ran a story entitled "College is not as unaffordable as you think." USA TODAY ran stories in June titled, "Grants more than offset soaring university tuition," and "Merit awards make college more affordable." As many Louisiana students and their parents prepare for college, the seemingly contradictory nature of these reports increases the anxiety about the cost of college.
This article is the first in a series that will explore college price, explain the many financial aid alternatives available, separate fact from fiction on the true cost of a college education, and discuss the importance of a college degree for the individual and the public.
What do you mean by the cost of college?
The angst over college costs is not new. R.W. Tallman, in a 1927 study, attempted to link intelligence with the decision to drop out of college. His research found that the primary reason for leaving school was financial. The subjects of that study were the 1920 freshman class at the University of Iowa.
More recently, in 1997, Congress created the National Commission on the Cost of Higher Education as an independent body and called for a review of college costs and prices. The resulting report, "Straight Talk about College Costs & Prices," was somewhat of a compromise document that added little to the public debate on the issue. However, the report did find, among other things, that the term "cost" was used interchangeably to mean several different things. Therefore, the report carefully defined several terms that are important to the discussion. The terms they defined were cost, price and subsidy.
Cost is defined as what institutions spend to provide education and related educational services to students. Students do not pay the total cost of a college education. This difference between the cost of education, as defined above and the sticker price defined below is called a subsidy. There is a general subsidy that is provided to all students, regardless of whether they attend a public or a private institution. For public higher education, the subsidy is primarily state appropriations. We will explore the subsidy concept in a later series of articles.
Price is defined as what students and their families are charged and what they pay. The report further defined price as sticker price, total price and net price.
Sticker price is the tuition and fees that institutions charge. If you look at a college catalogue and go to the tuition section, you will find the "sticker price." In other words, sticker price is what the published tuition and fees are for an individual institution.
Total price or total price of attendance is the tuition and fees plus the other expenses related to college attendance. These charges will generally included housing, meals, books, and transportation. This is generally called "cost of attendance" by the financial aid analysts.
What will I have to pay out-of-pocket?
Net price, on the other hand, is the amount students pay after financial aid is subtracted from price. There could be - and for many students there is - a significant difference between sticker price or total price and net price. The nexus between sticker price and net price, and how college students and their parents are directly affected by these two concepts will be explored over the next few weeks.