The Affordability Conundrum: Value, Price, and Choice in Higher Education

By Jael Greene

The Manhattan Institute’s newest report, The Affordability Conundrum: Value, Price, and Choice in Higher Education examined two types of questions: for whom is college affordable and why? The authors used data from the National Postsecondary Student Aid Study (NPSAS) to analyze average net costs and compare student experiences. They also used an affordability benchmark for higher education called “the Rule of 10,” which maintains that students and their families should pay no more for college than the savings accumulated by setting aside 10% of their discretionary income for ten years, in addition to student earnings from work 10 hours a week while enrolled in school.

Key findings include:

• The average net cost for students over the course of their college careers is $54,092.
  • On average, students and their families will take on approximately $16,498 in debt over the course of their degrees, which covers about 30% of the net cost. Students earn on average $16,248 over the duration of their degree (including through work study programs) which will cover another 30%. The remaining 40% is the out-of-pocket cost to the student and family.
• Depending on the type of institution, net cost varies significantly.
  • Students who attend private nonprofit institutions pay an average net cost of $101,518, compared to an average net cost of $64,082 at a public four year institution and an average net cost of $17,419 at public two year colleges.
• Lower-income students tend to attend less expensive schools than higher-income students, regardless of sector.
  • Lower-income students at four-year public institutions choose to attend schools with sticker prices approximately $5,454 below the average cost in the sector, while higher-income students selected schools with sticker prices $7,868 above the average cost in the sector.
  • This gap becomes even more pronounced in the private nonprofit sector, with lower-income students choosing institutions with sticker prices $17,686 below the sector average and higher-income students selecting schools with sticker prices $20,167 above the sector average.
• Sixty-eight percent of students pay more for their undergraduate degrees than what the Rule of 10 price-based benchmark suggests is affordable.
  • On average, students paid double the amount indicated by the Rule of 10, even with the help of loans and contributing work earnings beyond those indicated by this benchmark.