College Costs, Prices and the Great Recession. Lumina Issue Papers

As states and families begin to recover from the effects of the Great Recession, some of the urgency about college affordability may start to ease. The most recent "Trends in College Pricing" report shows tuition rising more slowly than in recent years (Baum and Ma 2013). Growth in Pell grant applications is also expected to slow as income picks back up and many students transition into newly available jobs. Yet it could all happen again when the next crisis hits. Education budgets could be slashed indiscriminately, tuition could skyrocket just as incomes are falling, and the worst-off states could find themselves least able to keep the college dream alive for students who count on public support. If we learned anything from the last few years, however, we can be better prepared. In order not to repeat some of the mistakes of the recession, it will help to understand how the economy, college costs, and college prices interact. Factors that can make costs higher or lower than the average include: (1) Types of programs offered (e.g. engineering costs about twice as much as business, and nursing costs three times as much as liberal arts); (2) Instructional approach (larger vs. smaller classes, distance or hybrid vs. classroom-based, tenured faculty vs. lecturers or adjuncts); (3) Low- or high-cost location (e.g. Oklahoma is generally less expensive than New Jersey); (4) Size (larger institutions usually spend less per student) (5) Age of institution (new institutions have start-up costs, older ones may have costly historic buildings to maintain and operate); and (6) Management philosophy and administrative efficiency.