Economic Inequality and Higher Education: Access, Persistence, and Success

7. Costs and Implications

Chapter 7 Costs and Implications AMY ELLEN SCHWARTZ F EW ISSUES ignite the discussion of higher education in America today more consistently and explosively than the escalating cost of attending college. Parents and students, educators, policy makers, and politicians spanning a wide political and socioeconomic spectrum worry about rising tuition. Articles in the popular press regularly decry increasingly outrageous “sticker prices” in higher education fueled by estimates from the consumer price index (CPI) suggesting price increases that outpace overall inflation. Unfortunately, this information about the cost of college is, at best, misleading, in that it overstates significantly the cost that many students will face as they prepare to enroll in college. Most obviously, it ignores financial aid and scholarships, which, for many students, significantly offset tuition and fees. Perhaps equally important, however, the focus is all too often on four-year colleges and the cost of full-time attendance . As an example, a recent article—“Top Ten Priciest Schools . . . and the Cheapest”—included a table showing the listed tuitions for full-time attendance at a set of four-year colleges, beginning with Sarah Lawrence College at over $32,000 and ending with the University of Nevada–Reno at nearly $2,700.1 Information on the cost of two-year colleges (or community colleges) and of part-time attendance, both of which are particularly important to low-income students, is less widely heralded and less accessible.2 It may then, perhaps, not be surprising that students and parents overestimate the cost of attending college (see American Council on Education 1998; Kane 2002). For example, Thomas Kane (2002) reported that Boston-area high school students estimated even the sticker price of Bunker Hill Community College, a local school, to be more than $6,000, substantially more than the true sticker price of $3,140. Even more disturbing , the survey indicates that students from disadvantaged backgrounds have even faultier information about the price of college than their suburban counterparts. Thus, to the extent that good decision making 157 requires an accurate weighing of costs and benefits, it is quite likely that students—and particularly low-income students—are not able to make optimal decisions regarding such things as curriculum, work effort, and persistence in high school and in college. Of course, public officials and policy makers also need high quality and accurate information on the cost of college to make good decisions. This chapter presents and analyzes trends in the consumer price of both two-year and four-year colleges, distinguishing, where possible, between private and public institutions. The focus is thus on the price paid to attend college, not on the cost of producing and providing higher education services. Understanding and measuring the cost is complicated , however, by the complex nature of the modern college, with its multiple outputs, varied objectives, and diverse financing. To begin, estimating the price of college requires adjustments for financial aid and scholarships, which is made more difficult by the complex array of programs and eligibility rules. Estimates must be adjusted to account for tax credits, increasingly important with the spread of programs such as the HOPE and Lifetime Learning credits (see Dynarski 2004; Long 2004b). Further, adjustments must be made to account for the differences in the college “product” necessitated by the heterogeneity in the college market. Whereas some schools are residential, emphasizing campus life and fulltime study, others have no dormitories and emphasize no-frills study that can be pursued part-time. Some offer study in a wide range of areas and degrees, others offer only a specialized set of degree programs and study areas. There is a wide range in the size of schools, the splendor of the campuses , the selectivity of admissions, the generosity of the course offerings, the excellence of the faculty, and so on. Furthermore, these characteristics of institutions change over time. It is, then, not surprising that there is also a wide variation in tuition, explained, in part, by differences in the characteristics of colleges (for more on the relationship between prices and the characteristics of colleges, see Schwartz and Scafidi 2004). Finally, it is important to note the difference between the out-of-pocket costs of college—that is, the price that a student pays for his or her education and attendant activities—and the full economic cost of attending college , which includes the opportunity cost to the student and any disutility of attendance. Opportunity costs are, on the whole, far larger and...