The real cost of college is confusing and hidden, new study says

Posted April 17

College cost-of-living estimates lack rigor and consistency, leaving low-income students vulnerable to financial crises and dropping out. (Deseret Photo)

Getting young people into college gets them nowhere if the cost of getting that degree has been poorly estimated and students can’t afford to finish, argues a new report by a University of Wisconsin sociologist.

One of the major factors derailing low-income college students in college is a disconnect between the listed sticker price of college attendance and its actual cost, according to the report, “The Real Cost of College,” authored by Sara Goldrick-Rab and published by the Century Foundation.

Students from low-income families are vulnerable to financial crises because tuition and fees are unclear, cost-of-living estimates are faulty, and financial aid packages often only reckon with the first year of studies, Goldrick-Rab argues.

The graduation gap between students of different incomes is significant. The U.S. Department of Education reported last month that just 50 percent of Pell Grant recipients graduate from college within six years, compared to 68 percent of non-Pell Grant recipients. Pell Grants are a key measure of family resources.

Students are confused about the cost of college because the public conversation about college costs tends to focus on tuition, which only reflects a fraction of the real cost, Goldrick-Rab argues. According to the College Board, students at in-state public universities in 2014-15 not living at home paid $9,410 in tuition on average, but to survive they paid $14,200 in housing, food, and miscellaneous costs.

“Low-income students who try to cut corners on items like car repairs or dental work will pay more in the long run, and will often be caught off guard mid-semester with a crisis that forces them out of school,” Goldrick-Rab argues. "Putting into college and then hitting them with unexpected bills contributes to the crisis of dropouts with debt they cannot afford to pay.”

Understating costs

Part of the problem is that colleges tend to underestimate the cost of living for students, leading those with shaky finances to get in over their heads.

Last year, Golrick-Rab and Robert Kelchen, a professor of higher education at Seton Hall University, collaborated on a study that compared the stated cost of living estimates for each college based on data at the county level on food, health insurance and transportation.

Colleges differed widely, they found, and there was often no logic to the differences. Some colleges have twice the listed living allowance as another as few as five miles away, Kelchen said. When students and parents rely on these cost estimates, he argues, they are taking a gamble.

Colleges are required to produce their own living cost estimates, but there is no science to it, Goldrick-Rab said. And colleges feel pressure to hold down their cost of living estimates, she said, because it helps defray the sticker-shock effect of tuition hikes.

"Colleges can set these cost of living estimates any way they see fit," Kelchen said. "Some make a good faith effort, but it's hard to do."

More accurate cost-of-living data would require costly and cumbersome student surveys, Kelchen notes. And in addition to incentives to keep the allowance lower to appear more affordable, some college administrators want to lower cost-of-living estimates to reduce the total amount that students can borrow because they fear students are taking out too much debt they can't repay.

More traps

Faulty raw cost estimates are only one of several financial traps awaiting the unwary student.

Goldrick-Rab recently surveyed 1,100 college students on student aid paperwork awareness, finding widespread ignorance of the rules. Twenty-six percent did not know there was a minimum GPA requirement, for example. One student, she says, dropped an elective to focus on a required math class, unaware that this pushed her below the minimum course load. As a result, she lost all her grant aid.

Other students get tripped up because the Expected Family Contribution excludes key factors, like parental debt levels, and thus often overstates a parent's ability to contribute.

She cites the example of a student whose father, a struggling farmer, sold most of his cattle to pay off debts, and she lost her grants because his “income” suddenly spiked, even though he had no more assets than before.

Working too much

Cochrane points to research showing that college students working more than 20 hours a week are much less likely to graduate. Because colleges obscure the real cost of attendance, she says, students on the financial bubble often end up working 30 hours a week or more.

"Students who are living in their cars or who haven't eaten for the last day will not be focused on their studies," Cochrane said. But if those students then ramp up their work hours, they risk derailing their schooling.

"Research on why students drop out will rarely conclude that financial aid is not enough," notes Debbie Cochrane, research director at the Oakland, California, based Institute for College Access and Success. "But it will conclude that students will drop out because they had to work. Well, why did they have to work?"

The answer, Cochrane argues, is to offer more financial aid. In particular, she would like to redirect federal work study funds to allow more needy students to work on campus, which tends to keep them more integrated into the rhythm of the campus.

The federal government spends $1 billion every year offering work study to students through their schools. "But we give the bulk of that to schools with fewer needy students," Cochrane said, "and very little to commuter state schools and community colleges."

It is a damning paradox, she argues, that federal work study funds end up disproportionally benefiting well-off students at well-endowed universities.

Transparency and simplification

In addition to beefing up financial aid and work study, possible solutions to college derailment include more transparent costs and a simplified process, Goldrick-Raab said.

Kelchen said he would like to see some standardization for how living allowances are determined. That could involve either better coordination among schools or some kind of federal role setting guidelines and requiring schools to justify divergences from them.

One of the problems hitting low-income students, agrees Goldrick-Rab, is not just that cost estimates are off but that schools often give aid packages that have to be renewed year by year. If a student misses one of multiple hurdles, their grants and loans for the next year can be lost with little warning.

“Students who begin a journey with one financial vision will be derailed and saddled with debt if that view proves to be a mirage,” she said. "Students need a road map that shows the real price of college all the way to graduation."



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