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

“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.