Key Points 

• While the sticker price of college rose $13,717 in real terms between 1989–90 and 2019–20, the net tuition students pay after financial aid rose just $4,526. 
• However, the net tuition received by institutions rose by a greater amount ($8,128). This is because institutions captured increases in external financial aid, such as Pell Grants, instead of passing those increases through to students. 
• External financial aid for the average student tripled in real terms between 1990 and 2020, from $1,726 to $5,328. 
• Had the net tuition institutions charge before external aid remained at 1990 levels (adjusting for inflation), students at four-year public colleges would have free tuition today, thanks to rises in external financial aid. 

Introduction

College costs are out of control—or so the narrative goes. In recent years, a counternarrative has emerged that argues, correctly, that the meteoric rise in the sticker price of college is misleading. Net college tuition, or tuition after financial aid is applied, has risen far less quickly than sticker price tuition and has even fallen in recent years.¹ 

However, net tuition’s relative stability is largely not due to universities holding their own prices down. Rather, financial aid from external sources, such as the federal government’s Pell Grant, has increased dramatically over the past three decades. This has kept net prices for students down—even as colleges and universities collect more tuition revenue. 

This report makes a distinction between two measures of net tuition. Students’ net tuition is the amount of tuition and required fees that students pay out of their own wallets, after all grants and scholarships are applied. By contrast, institutions’ net tuition is the amount of tuition revenue that institutions receive for enrolling a student. It includes not just the tuition that students pay out of pocket but also financial aid received from external sources like governments and employers. 

Read the entire report here.