Education

"Government Attempts at College Cost Transparency Ineffective, May Make Decision-Making Worse"

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"Government Attempts at College Cost Transparency Ineffective, May Make Decision-Making Worse"

That's the subject-line heading for an email about a new study from the liberal-bashing reactionary conservatives—I kid, I kid—over at the Brookings Institution.

In a paper by Phillip B. Levine of Wellesley College finds that most college-cost calculators, including ones produced by the White House and the U.S Department of Education, are confusing and terrible. This is particularly harmful to lower-income Americans, who simply assume that college, a proven way to move up the income ladder, is beyond reach under any circumstance. The typical family with college-age kids has annual income of about $68,000 and a net worth of $55,000 (most of it a house). "For families with those financial resources," writes Levine, "and certainly for those with fewer, the cost of college is clearly unaffordable."

Net price calculators are too difficult to use to have much impact. Differences in average net prices across schools capture variation in the socioeconomic circumstances of the student body rather than price differences that an individual student would face. Average net prices by income category are substantially influenced by outliers, a statistical problem typically associated with the use of averages rather than medians. In the end, tools designed to improve the transparency of college costs need to be simple, accurate, and individualized. None of the currently mandated tools satisfy all of those goals.

"For many young Americans," says Levine, only knowing the sticker price of college "reduces the likelihood that they will attend college—and it reduces the quality of the institutions for those that do attend." One study cited by Levine found that students who were given help in calculating net price information were 29 percent more likely to finish a couple of years of college. Other studies show that better-informed students are not only more likely to apply to and enter college but that they go to colleges with higher graduation rates and higher average SAT scores. Levine stumps for Wellesley's simplified tuition calculator as a model

Full paper here. His analysis rings true to me. My older brother, the first in my family to attend college, had monster SAT scores and a host of attractive extracurriculars that earned scouting by a number of schools. My parents, alas, had no understanding of the college application process much less the differences between sticker and net prices (they were even worse when it came to shopping for cars, but that's another sad story). As a result, and despite the fact that my brother was footing his own bill, they narrowed the range of possibilites essentially to one, the flagship state university (which as it happens, was Milton Friedman's alma mater and also the place that my brother discovered Reason magazine and started sharing it with me, and which I attended and learned how to craft run-on sentences, so it's all good).

I think many private colleges are vastly overrated and virtually all are overpriced if you consider the cost of more seriously affordable alternatives (studies routinely show no earnings or career boost in actually attending the highest-ranked school to which you gained admission). Yet there's no question that going to college is a real bargain when you factor in increased earnings, lower unemployment rates, and especially the wider range of life options that come with higher education. The media and political discourse on college, which constantly hypes tuition costs and student-loan amounts that are rarely if ever representative, is inaccurate and dispiriting.

Given that, it's a real shame that government-mandated cost calculators for college are ineffective at best and actually discouraging at worst. It's not surprising, perhaps, but it's still a shame, especially when the biggest effect is on people who stand to gain the most by pursuing a college sheepskin.

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  1. It’s just as well. I’ve heard from reliable sources that people are too stupid for transparency anyway.

  2. Using Stanley (Millionaire Next Door) Wealth Accumulator calculator, a family with an income of 68k, lets say 45 years old, that gives 306k. Multiply and divide by 2, a good accumulator of wealth would have a net worth over 612k, a poor one, under 153k.

    Yikes.

  3. My wife is talking about getting her Ph. D. I told her to calculate the ROI before she applies. Hopefully that will put a stop to the non-sense.

  4. The world needs ditch diggers, too.

    1. Wouldn’t those be heavy equipment operators these days? I mean one guy with a modular caterpillar could do a lot of jobs that used to take large teams of guys with hand tools.

  5. “tools designed to improve the transparency of college costs need to be simple, accurate, and individualized.”

    This is impossible given that college pricing is based on complicated financial aid forms, and is often subjective.

    1. “Cost of College” = “How much can you afford?” + “How much aid can you get?” + “Cost of Living for 4 years”

      1. +attorney fees for the inevitable rape charges.

        1. Sad, but GOOD POINT.

      2. Plus opportunity cost for 4 years of not working full time.

  6. I’m from the government. I’m here to help.

  7. Average net prices by income category are substantially influenced by outliers, a statistical problem typically associated with the use of averages rather than medians.

    Not necessarily. In this case, presumably the “net price” is going to be somewhere between zero and the full unsubsidized price, so the relative size of any outlier is limited. In a bounded range like this, the influence of outliers is considerably dampened, especially if the size of the dataset is reasonably large. College price calculators are flawed, but not because they present averages rather than medians.

  8. “For families with those financial resources,” writes Levine, “and certainly for those with fewer, the cost of college is clearly unaffordable.”

    Awww, sad trombone from the guy from Wellesley, which in 2010, charged $50,026 for a year of undergrad.

    I’m guessing Levine’s angle is he thinks the government should be making college more “affordable” by letting colleges oink their ways up to the trough even more, and subsidizing it even more heavily through grants and loans.

    1. Hmph, actually, it looks like I don’t even have to guess what his angle is; he spells it out:

      “For many young Americans,” says Levine, only knowing the sticker price of college “reduces the likelihood that they will attend college?and it reduces the quality of the institutions for those that do attend.” One study cited by Levine found that students who were given help in calculating net price information were 29 percent more likely to finish a couple of years of college.

      Lemme just run this through the Rent-Seeker Translator:

      “It’s too bad those calculators show you what we’re actually charging, because kids are more likely to choose a state or cheaper school when they see what sort of outrageous gouging we’re doing based on our prestigious brand name. Those damn calculators should just show students what they’ll pay at our snooty school after we collect all of our fat subsidies.”

  9. “College…a proven way to move up the income ladder…”
    Tell that to all the baristas with 80K in student loans and a degree in French poetry. This is the biggest canard in the whole college cost debate. When people throw this around they don’t realize that 7 figure neurosurgeons are being lumped in with minimum wage fine arts people, that college is a self selecting mechanism so that the truly stupid who can never make a high income based on their own abilities are automatically excluded and much of the college income enhancement comes from the contacts one makes while in college, which favors the already well connected. Just getting a degree from Metro State College doesn’t improve your earnings potential significantly.

  10. Yes, most students cannot afford themselves just concentrate on study and get their degree. Most young people have to work simultaneously, and neither educators, nor employers want to support such people. Fortunately, there are professional essay writers uk who can help to accomplish our papers and get perfect grades. That’s why, there are less students who quit. Anyway, there is no use to complain or blame someone, as it is our reality and we have just to be ready for difficulties and constant struggle.

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