"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.