Sandy Baum: [00:00:00] There are two kinds of prices. One is the sticker price. You go on the website, you see what the tuition and fees are, what the women board costs are at a particular college, but what you actually pay is the net price. In other words. That college may give you a discount. It may give you an institutional grant and you’re quite likely to get some grant aid from the state, from the federal government.

So what, whether you can afford it depends on is the net price. But what we see most visibly and what’s most simple to monitor is the sticker project.

Jonathan Hughes: Hi folks, and welcome to the MEFA Podcast. Happy 2026. This is it, it’s our first show of the new year, and we got a good one for you. I’m Jonathan Hughes and I’m the host.

And today we’re going to be highlighting a topic that I’ve been chewing on for a [00:01:00] while. It’s something that I’ve been reading about, I’ve been seeing articles about this topic pop up here and there for the past few months. The one that first caught my attention was in the Atlantic Magazine entitled, The Secret That Colleges Should Stop Keeping. So what’s the secret? It’s that the price of college isn’t actually rising nearly as much as folks think. In fact, for most families, it costs less now to go to college than it did 10 years ago. So that’s good news, right? We should tell people, we should make sure that people know about this.

But then a thought was voiced among some of us. It seems a little tone deaf. After all, we know that tuitions keep rising. People are having a hard time paying for college. We talk to folks all the time wondering how they can finance their child’s college education or their own. So which is it? Is the price of college falling, is it not?

Like so much. It’s complicated. And here to help us navigate this question in all of its complicated glory is [00:02:00] our guest on the show today, Sandy Baum. She was actually quoted as a source in that Atlantic article that I mentioned earlier. She’s an expert on this topic of course, and she was gracious enough to give us some of her time.

So I will be back after our talk. To wrap things up, now, let’s meet our guest.

Sandy Baum: I’m Sandy Baum. I’m a senior fellow at the Urban Institute. I’m a higher education economist, and I was a professor of economics at Skidmore College for many years. And I just have done a lot of research and writing and thinking and talking about higher education finance.

And for 18 years I coauthored the college board’s, publications, trends in college pricing and trends in student aid. That caused me to think in great detail about college prices and student aid.

Jonathan Hughes: Thank you for being on. And that cuts to the heart of what we want to talk about today, which is the cost of college and, the, this current state of [00:03:00] it, and there’s been some news that has come out and some articles that I’ve seen you quoted in and about this perception that, the cost of college continues to increase to such an extent that it will soon be if it isn’t already out of reach for many or most families. Is that the case?

Sandy Baum: Okay, first let me say that when you say the cost of college, what you really mean is the price of college. And we tend to differentiate The cost is like we have to produce college education and the cost of producing college education rises all the time. It’s expensive, right? People don’t like to think about that.

Like how did this come about? What is it? To produce. And what people really care about is the price that they pay for college. And there are two kinds of prices. One is the sticker price. You go on the website, you see what the tuition and fees are, what the room board costs are at a particular college, but what you actually pay is the net price.

Other [00:04:00] words. That college may give you a discount. It may give you an institutional grant, and you’re quite likely to get some grant aid from the state, from the federal government. So what, whether you can afford it depends on is the net price, but what we see most visibly and what’s most simple to monitor.

Is the sticker price. The sticker price has, is much higher than it was 30 years ago after adjusting for inflation, much higher than it was 20 years ago, but not higher than it was 10 years ago. In other words, this idea that prices are rising rapidly. Hasn’t been true for the most recent years.

Really, it’s a decade. If you look at how huge increases over the previous two decades, but not between 2015 and 2025. So now that doesn’t mean it’s cheap, right? And when you ask whether people can afford things, it’s not actually how fast they’ve gone up in recent years. It’s how high they’re, that [00:05:00] determines whether they can afford them or not.

It’s like people think. If there was a lot of inflation in general, food prices went up, they wanna see the food prices go down. They’re not going to go down. If we tackle inflation, the prices might stay the same. They might rise very slowly, but they’re not going go down and so that doesn’t mean that people are going to be able to afford them unless their incomes rise enough.

So yeah, college, the sticker price of college is certainly. Out of reach for many people, particularly people in the bottom half of the income distribution, whose incomes have simply just not been rising to keep up with all the expenses that they face, and they buy a lot of things before they think about paying for college.

You pay your rent, you pay for your utilities, you eat and then you say what’s left over to pay for college. So paying for college is certainly a challenge for many households. But that’s not because it’s been rising rapidly in recent years. [00:06:00]

Jonathan Hughes: Yeah. So there’s a lot that you gave me there, and that’s great and I want to take it just one piece at a time. The first thing I want to talk about is the difference between sticker price and the actual price that families do pay for college. And can you talk about the difference between those things?

Sandy Baum: First of all, there are many different kinds of colleges with many different prices. Community colleges are generally have the lowest sticker prices, and then public four year colleges, and then private nonprofit, four year colleges.

And then there are for-profit colleges that are somewhere in between the public and the private nonprofit. But for many colleges, particularly the most expensive ones, and particularly the private nonprofit ones. The price that they charge, they might give everybody a discount. They might tell you’re getting a merit scholarship.

They might tell you’re getting an athletic scholarship. They might, say you come from California, you get a scholarship. But they tend to discount their prices. For many students, some of that is because they just do, and some of [00:07:00] it because they want you to come. And some of it is based on need.

So if you think about the most expensive colleges in the country, the highly selective, the Stanford, Harvard Williams, those colleges. They give need-based aid. If you can’t afford it, if you are come, if you come from a poor household, it’s probably cheaper for you to go to Harvard than it is to go to the local community college because Harvard has enough money to help you and to make it affordable for you.

So that’s one thing. It’s institutions give discounts. Then the other thing is that the federal government provides Pell grants. Pell grants are granted. For low and moderate income students and you can get up to about $7,000 a year. If you don’t have any money that you can take with you to whichever college you go to, if you go to a community college, it’ll probably pay your whole tuition.

If you go to a public four year, it probably won’t pay your whole tuition, but it will go a long way. And then you might also get a grant from your state [00:08:00] that will help you to pay. So you got to take all those things into consideration to figure out how much you have to actually pay out of pocket, what you’ll have to borrow to cover, or get your parents to cover or find in, or earn money to cover in another way.

Jonathan Hughes: All right. I need to break in here really quick to let you know that while you won’t know for sure. The difference between the sticker price of a college and the net price. We’ve been talking about the net price, and that is the price that you’ll pay after financial aid. You won’t know that until you actually file your financial aid forms and get financial aid offers from your colleges, but there are ways to get an idea of what.

The actual net price of a college might be for you Now see, every nonprofit college is required to have a net price calculator on their website now. It should only take a few minutes for you to complete, put in your information, including income and [00:09:00] assets, number of family members in your household. Et cetera.

And the calculator will produce a sample financial aid offer from that college and a resulting balance. Now, a few words of caution, it’s only an estimate, and as an estimate, it’s only as accurate as the information that you supply. And of course there may be changes in your finances between when you use the calculator and when you actually end up applying for aid.

But overall, I think it’s a really valuable tool for families to use. Get a sense of what kind of aid they may be eligible for at a particular college. Okay. Now back to the chat. Has there been an increase at the level of how much aid is granted or has that pretty much stayed static?

Sandy Baum: Institutions are actually awarding an increasing share. Of the grant aid. And they have been increasing the amount that they offer states to a lesser extent, the federal government. It was a big [00:10:00] increase like in 2010, 2011, 2012. Then that hasn’t really been increasing much. So is it enough? It’s not enough for many people who are struggling to pay. But that’s not because it’s been shrinking. The net price of college has actually been declining for. For most groups, at most institutions, not declining precipitously, but sure, certainly not increasing.

Jonathan Hughes: I think that’s important too. And I’m glad that you keep stressing that this is a relative change. It’s not that we’re trying to say to everybody, Hey, great news colleges are cheap now. Everyone can afford it. And I’m glad that you keep pointing that out. I also want to say ask you a question about inflation. Is it just that you said that the net dollars are higher, but that, is it just that they are. Increasing at a slower pace than everything else has increased.

Sandy Baum: If you look at just the sticker tuition prices at private nonprofit colleges they’re, the [00:11:00] inflation really does explain a lot of it in the sense that like they increase their tuition every year. Not by the same amount, but there’s not that much variation.

It might be 2% or 3% or 5%. So when there’s a lot of inflation in the economy, the real increase, the inflation adjusted increase is lower. Like when we had 7% inflation a couple of years ago. General inflation colleges didn’t suddenly say, oh, we’re going to raise our tuition by 7%. So you saw that, that decline in real terms in the Publix. There’s much more of a relationship to state appropriations, so the state funding that colleges get. So you had huge increases in the early two thousands and the early 1990s when we had a recession and states pulled back on funding, huge increases, and over the last decade, they really have had smaller annual increases, even forgetting about inflation. And then with inflation, there have really been negative [00:12:00] changes. So I would say public institutions really have been, implementing, even forgetting about inflation, smaller increases in recent years and then add inflation to that.

And everything else got more expensive. Now, one thing that we haven’t mentioned is that. When people go to college, they still have to live and eat. Some students live on campus and they pay those charges to the institution. Some people get an apartment and they have to pay rent and food.

Some people live at home with their parents, but housing prices and food prices have gone up quite a bit in recent years. That’s what a lot of the inflation has been. And so people think that if you look at the budget of being in college, then you’re like how am I going to pay my rent? I’m going to school.

I’m not working full time. How am I going to do that? And that has become an increasing challenge. It has nothing to do with the price of college. Sure. But it does seriously affect the budgets of college students and they have to come up with that money.

Jonathan Hughes: If this is the [00:13:00] case where, tuition has been the relative cost of it has been declining over the past 10 years it doesn’t feel as though people know that or feel that is true.

Sandy Baum: The first thing is, you pay for college only for a few years while you’re there, the fact that it has been expensive for a long time doesn’t make it any easier for you. When you come to the door, you’re like, oh my God, I have this huge expenditure to add to my budget. And so the fact that it’s the same as it was three years ago is irrelevant, right?

It’s still hard for you to pay. It’s a huge expense in terms of if you think I’m going to pay for it out of pocket this year. That’s almost impossible. What, it’s interesting, when I first started studying this stuff many years ago, people always talked about paying for college over time.

That the idea is you should save and then you should pay some while you’re in college and you could borrow so many paying back after. So if you were going to go to college for four years, maybe you should think about paying over 12 years. [00:14:00] So divide by 12, don’t divide by four, and think about paying over a longer period of time.

People don’t tend to talk about it that way so much anymore. When you buy a house, you don’t think, do I have, $300,000 in my pocket to buy a house? You borrow the money because you’re going to live in it for a long time. When you go to college, you’re investing in yourself. You are buying an education that’s going to stay with you for the rest of your life, probably going to increase your earnings significantly.

But people don’t think, oh, then I can pay for it over my whole lifetime because I’m going to get the benefit of it over my whole lifetime. They think, here’s the tuition bill. I have to pay it today. Where am I going to come up with $20,000?

Jonathan Hughes: Why do you think that’s changed over the past, 20 years or so?

Sandy Baum: Why do people think about it, less?

Jonathan Hughes: Yeah.

Sandy Baum: I just I’m not sure that the people paying ever thought about it that much. It was the people who were analyzing it and trying to figure out, a lot of people pay attention to. The financial aid system, how can [00:15:00] we figure out how much different households can afford to pay?

So we can decide about need-based aid? How do we decide who needs a Pell grant and who doesn’t? How does a private college with a lot of money, if it’s owned to distribute, decide how much different families can afford to pay? It’s very complicated. It’s, everybody thinks they can’t afford to pay that much.

It’s been long been a challenge. Why do people think? It’s unbelievable that they have $20,000 of student debt, but then they graduate from college, they buy a car and they borrow another $20,000 and they think, yeah, but I need that car.

And they don’t think, yeah, but I needed that college education and I wouldn’t have this job if I hadn’t gone to college.

Why is that you in all kinds of psychological issues here. It’s not tangible, it’s not and you can’t sell it. All of a sudden if you decided you didn’t want a car, it was stressing your life to make those payments you could sell. It wouldn’t be worth as much, but you can’t sell your college education.

You’ve done it there it is. And I think people get used to, to their lives and they have a job and they don’t every day wake up and think, oh wow, good thing I went to [00:16:00] college so I could get this job. They just, that’s just who they are. And they think, I can’t believe I have to pay the student loan bill.

I wish I could do something else with that money. And for some people it doesn’t pay off. Some people really do have serious struggles and aren’t better off than they would’ve been if they hadn’t gone to college. But most people are significantly better off than if they hadn’t gone. But thinking of that as investment instead of just a day-to-day expenditure is difficult for many people.

Jonathan Hughes: You mentioned a few decades of really high growth in the, price of college? Yeah. For the nineties and the, what is it, the eighties, the nineties, the two thousands. And I’m just wondering, two thousands. Yeah. I’m wondering what drove those costs, if we know that, and how long does things like that. How long did these trends take to appear? Like this trend that we’re talking about now? Saw a few articles about it and they measured this time from 2014 on. These sort of big trends, how long do they take to come into focus and do we know what sort of drives them

Sandy Baum: I’m not sure that there’s a [00:17:00] consistent answer to that. We know in terms of public institutions, if you draw a graph of the annual percentage change in state appropriations. Per student. Student at public institutions and the annual change in tuition, they just move in opposite directions. When appropriations are shrinking or growing more slowly, tuition rises more rapidly, and then when appropriations recover, tuition increases, slow down.

That’s a real pattern, so that’s clearly part of the explanation. There’s a recession and states figure out how to fund higher education anyway. Or like now with cuts in Medicaid, that’s going to put a strain on state budgets. Are they going to respond by cutting appropriations for higher education?

Higher education is going to say, please don’t. But I’m not sure that’s going to be so effective. Private colleges, that’s not so much the issue, but when the economy sours and people don’t feel [00:18:00] as affluent or their stock portfolios diminish, they’re going to make keyword donations and a lot of private colleges either have endowments that people have donated to them or they collect money.

Every year you get a letter from the college you graduated from saying, please give us some money. And even if they don’t have a significant endowment, they may rely on those donations and those could be harmed. There are obviously. We’re witnessing now the federal government pulling back a lot of its support for research at colleges and so on.

That’s significant. So where their revenues come from, but expenditures, colleges do lots of things that they didn’t do 30 years ago. They have lots more things you can major in. They have lots better facilities. They have more people on campus who support students who have difficulty learning.

They have, a whole range of things that may improve student learning and outcomes, and some of them may not. Some of it is competing for students. I want you to come to my college and you want. [00:19:00] And another college wants you to come to them. And so they either give you more granted or they promise you, a fancier dorm room or whatever. So that certainly is an element of it as well.

Jonathan Hughes: So we’ve been talking for 20 minutes or so and we’ve painted this really sort of complex picture because it is complex. But to just break everything down in a helpful way for families or students who may be listening to this. Thinking about, someone like me who has a 12-year-old who’s saving for college and worried about if they’re able to afford it, and looking at the sort of sticker price of college continue to rise. How should they take this information, this trend that we’ve been talking about, and incorporate that into the way they think about. Paying for college or applying to college or affording college? Yeah.

Sandy Baum: One is if you can afford to save, you should absolutely save. Put money into a 5 29 college savings account or put it just into a special [00:20:00] account and say, this money, I’m saving for my kid to go to college. And I know some families can’t do that that’s not that. Everybody should do that. So you should save, you should recognize that there are lots of different options.

And you should recognize. So in other words, should a student plan to live at home, should they plan to live on campus? And there are great advantages to living on campus and if you can afford it, it may well be worth it, but you can save a lot of money by not, you should not think about just the sticker price. Because again, as I said before, it can sometimes be cheaper to go to a college with a higher price tag because they have more money to help you. They have more financial aid. So don’t say you can’t apply to any. Expensive colleges, the students should apply to a range of institutions that are appealing and suitable for that individual student.

There’s no list that’s the best for everybody, but don’t eliminate colleges because of their price tag until you see what financial aid they’ll offer. And then you may have to eliminate. Them because of their price tag. So you should [00:21:00] think about it that way. You should think about, what does the student want?

And many people have no idea when they’re 18, what they want to do when they grow up. So picking a very narrow path. Can sometimes be a mistake. It may be better to go someplace where you have a broad set of liberal arts choices and then realizing you’re going to have to get a job afterwards. Make choices while you’re there, depending on your interest.

And one really important factor is one thing that makes college much more expensive for many people as they don’t graduate on time. The average student doesn’t get a bachelor’s degree in four years. It takes five years no more. That adds tremendously to the price of going to college. Academic preparation is really important. Students need to be prepared academically to succeed when they get to college. So thinking about all those things and then apply for financial aid. Fill out the federal application. See if your school asks for other information. Look for private scholarships that may be around in your community, but absolutely apply for [00:22:00] financial aid and what comes to borrowing money.

You shouldn’t be panicked about borrowing money for college. It’s a good investment. It’s okay, but borrow from the federal government. Don’t run to the bank and get a loan with a high price tag that you’ll have to pay off for your kids if they die. The federal government has lots of protections for students, and so borrowing a reasonable amount, a moderate amount through the federal government, that’s okay for the student to do that because they’ll probably be able to pay it back, and if they’re not able to, they won’t have to.

Jonathan Hughes: I realize this might not be a fair question to ask you, but just do you expect this trend to continue? For the next 10 years, which they of the declining price of dollars.

Sandy Baum: Oh, I am not going to make any predictions that Okay. I think I guess I would say, right now, especially because we’re in such a, sort of impending crisis about what is going to happen on many campuses.

I think there is enough concern about college prices that we’re unlikely to get to where we were when we had [00:23:00] like double digit increases in price. I don’t think it’s going to happen that way again. Do I think that the price is going to continue to fall in real terms? Probably not. But hopefully it will grow more slowly than it did over preceding decades.

Jonathan Hughes: All right. Is there anything else that you would like to say to any families or students or any counselors I guess, or anybody who may be listening?

Sandy Baum: No, just that, look, it’s expensive. There are a few big investments that you make in your life, and college is one of them. And hopefully, you do it once and.

It’s worth it for most people. You just have to choose, right? It’s not just go to college, any college, you want to know why you’re going. You want to make a good choice about what’s right for this student. And you want to think this is an investment. How would I pay to make an investment? What if I were starting a small business?

I’d borrow some money, I’d make sure I studied in advance, whether it was promising in terms of revenues. It’s not. Necessarily. It’s not a simple [00:24:00] decision and there’s a lot of information out there. Don’t pay for that information. Ask around, go to the college you’re interested in. Go to their financial aid office.

See if your high school can help Poke around online, but there are also all kinds of people out there trying to cheat you out of your money as you move through this process.

Jonathan Hughes: Sandy, thank you so much for joining us and hopefully you come back.

Sandy Baum: Okay. Thanks a lot.

Jonathan Hughes: All right. That was our show everyone. I’d like to thank our guest, Sandy Baum, for her time. It was a real pleasure to have her on, and hopefully we get to do it again. And folks, if you liked what you heard or what you saw on the show today, you want to hear more from us on planning, saving, and paying for college and career readiness, then please follow the show wherever you find your podcast.

And please remember to leave us a review. I’d like to thank our producer, Shaun Connolly. I’d like to thank Meredith Clement, AJ Yee, [00:25:00] Lisa Rooney, Lauren Danz and Christina Davidson for their assistance in posting the show. Once again, my name is Jonathan Hughes and this has been the MEFA Podcast. Thanks.