Look Beyond College 'Sticker Prices'

Many private colleges offer significant financial aid and remain an affordable option, even when compared to public schools

By Catharine Hill

Catharine Hill
Vassar College

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Looking for an affordable college education in tough economic times? Don't count out the privates.

In spite of the turmoil in financial markets and the increasing concerns about recession, we know that families continue to look for the best higher-education match for their children, even as they worry about how to pay for that education. With the financial stakes feeling so much higher, families should be sure to look beyond a college's "sticker price" to the net price they could pay after scholarship aid. Not applying to schools with high sticker prices that offer significant financial aid could actually lead families to pay more for their children's education, not less. And, in the process they might rule out great college options for their son or daughter.

Many public institutions of higher education are already seeing significant increases in their applications for the coming academic year, and deservedly so. Traditionally in the U.S., the public sector has kept higher education (in both two- and four-year programs) inexpensive for everyone. Over the last decade, however, the price of a public education has actually increased more rapidly than private tuition. With state budgets under pressure from such costs as health care and prison expenses, state support for higher education has been under pressure, and funding shortfalls have forced public colleges to increase their tuition and fees.

At the same time, the amount of financial aid offered at private institutions has been increasing rapidly. At Vassar, for example, we are providing more than $35 million in scholarship aid this school year, nearly 25% of our operating budget. And recent moves on the part of many private schools to eliminate loans from financial aid packages and replace them with increased scholarship funds has further reduced the net prices at these schools.

Private Schools Committed to Financial Aid

With Harvard's new pricing structure, a family making $100,000 will pay about $10,000 for total charges (tuition, room and board, and fees). This compares to the average charges at public four-year colleges and universities in 2008-09 of $14,333, as reported in the College Board's newly released Trends in College Pricing, 2008 (BusinessWeek.com, 10/29/08). Not every student can or wants to go to Harvard, of course, but prices at the other privates can be competitive as well.

At a set of selective private colleges and universities that I've researched, the actual price paid by U.S. families with incomes at the national median, $62,355 in 2007, was about a third of the full sticker price, very close to the average of total cost at the four-year publics. Many privates also offer merit aid, further reducing the net price for deserving candidates, independent of their financial need.

The current economic crisis may affect the affordability of both the public and private institutions in the coming years. State budgets will be under significant pressure, with slower economic growth reducing tax revenues. At the same time, lower-than-expected endowment returns at the privates are also creating budget pressures. Nevertheless, many privates are committed to significant financial aid, and will cut elsewhere first in their budgets. As you research college options, look for the privates that are committed to meeting full financial need and to the publics that avoid further increases in tuition to make up for any additional state budget shortfalls.

So, prices differ at the same school for different families, particularly at the higher-sticker-price private colleges and universities. The publics might be the best deal for some families, but more expensive for others. Your best bet is to apply widely to schools, and compare financial aid offers and net prices—not sticker prices—in the spring. Just don't pass up on applying to privates, assuming they are beyond your budget, because they might in fact be your most affordable option.

Catharine Hill is a higher-education economist and the president of Vassar College in Poughkeepsie, N.Y.