Average Tuition and Fee Charges (Enrollment-Weighted),

in Constant (2002) Dollars: 1971–72 to 2002–03

SOURCE: Trends in College Pricing 2002. Copyright © 2002 by College Entrance Examination

Board. Reproduced with permission. All rights reserved. www.collegeboard.com.

U.S. Department of Education

Institute of Education Sciences

NCES 2003–171

Congressionally

Mandated Studies 

of College Costs 

and Prices
Cost

The amount institutions spend to provide education and related educational services to students (measured through expenditures; see below). 

Price

In general, price is the amount students and their families are charged and what they pay for educational services. There are

different types of prices depending on what is included; see sticker price, total price of attendance, and net price below. 

Sticker price

The tuition and fees that institutions charge (the published price). 

“Average” tuition

All institutions charge different categories of students slightly different levels of tuition and fees. Students pay different fees in

addition to tuition charges. Fees are direct charges assessed for services such as laboratory expenses, health services, exercise

facilities, and art studios. The distinction between “tuition” and “fees” is particularly difficult to track in public institutions. At

the same time, many students receive tuition “discounts” in the form of institutional aid, which means that the net tuition is

frequently lower than the “sticker” price or full tuition charge. 

Price of attendance

The tuition and fees (sticker price) that institutions charge students plus other expenses related to their education. These

expenses may include housing (room and board if the student lives on campus, or rent or related housing costs if the student

does not live on campus), books, and transportation. This term is often referred to as the “cost of attendance.” 

Net price

The amount students and their families pay after financial aid is subtracted from the total price of attendance. 

Revenues

The current-fund revenue institutions receive can be categorized according to source—for example, tuition and fees; earnings

from endowment; government (state, federal and local) appropriations; government grants and contracts; private gifts, grants,

and contracts; sales of educational services, such as bookstores, dormitories, or auxiliary enterprises; and other revenue such as

hospital revenue and independent operations. Educational and general (E&G) revenue represents a part of total current-fund

revenue. 

Expenditures

Institutions expend current funds in discrete functional areas, which are categorized in operating budget categories such as

direct instruction; research; public service; academic support; student services; institutional support; operation and maintenance

of plant; and scholarships and fellowships. Educational and general (E&G) expenditures are a portion of total current-fund

expenditures. 

General subsidy

The general subsidy is the difference between the average price charged to students and the average cost, per student, to the

institution of providing an education. Because institutions receive revenue from both tuition and nontuition sources, students—

regardless of whether they attend public or private colleges or universities, or whether they receive financial aid—typically

receive a general subsidy. This general subsidy does not include the additional subsidies that some students receive from institutional scholarships and other types of financial aid. Institutional decisions about tuition levels also are decisions about setting

the level of the general subsidy. 
PAGE 3

CONGRESSIONALLY MANDATED STUDIES 

OF COLLEGE COSTS AND PRICES

(see page 6)

(see page 7)

(see pages 4 and 5)

(see IPEDS “COOL” on 

back page)

In its 1998 Amendments to the Higher Education Act, Congress directed the Commissioner 

of Education Statistics to conduct a study of higher education costs paid by institutions and 

prices paid by students and their families for a postsecondary education. (For full law, see:

http://www.ed.gov/legislation/HEA/sec101C.html) 

Section 131 of the 1998 amendments also required that the National Center for Education

Statistics (NCES) standardize definitions, redesign data systems to improve timeliness and usefulness, and provide consumer information to students and their families about college prices and

student financial aid.

The congressionally mandated study was influenced by the work and report of the National

Commission on the Cost of Higher Education, Straight Talk About College Costs and Prices, which

was delivered to Congress in 1998 after an intensive 6-month study of the trends and causes of

tuition increases. 

The Commission distinguished between prices and costs, and found that prices (what students

pay) had been increasing faster than inflation in both the public and private not-for-profit sectors.

Costs (what institutions spend) were also increasing, but at a slower rate than prices. 

Due to time constraints and lack of available data, the Commission was unable to determine

definitively the cause or causes for price increases; it recommended further study of costs and

prices and of the relationship between increased costs for institutions and increased prices for students and parents.

This overview presents the findings of three studies commissioned by the National Center for

Education Statistics as part of its report to Congress: Study of College Costs and Prices, 1988-89 to

1997-98; What Students Pay for College: Changes in Net Price of College Attendance Between

1992-93 and 1999-2000; and A Study of Higher Education Instructional Expenditures: The Delaware

Study of Instructional Costs and Productivity. 

The Study of College Costs and Prices examines the relationship between costs and prices and

attempts to determine the extent to which spending (expenditure) patterns contribute to tuition

increases in higher education. As part of this study, papers were commissioned from experts in

higher education finance and economics to provide congressional policymakers with a broad range

of views of the higher education research community.

The first study showed a weak relationship between price and cost, in line with the findings of the

cost commission. Accordingly, NCES further commissioned two follow-up studies. The first study,

What Students Pay for College, examines how increases in financial aid have helped students

and their families meet the growing price of a postsecondary education. This “net price” study

examines the relationship between price and various forms of student financial aid in order to

consider “affordability” for low- and middle-income students. 

The second study, A Study of Higher Education Instructional Expenditures, focuses exclusively

on instructional costs, which, on average, account for 80 percent of institutional expenditures. The

study examines direct instructional expenditures within the disciplinary mix of an institution and

for academic disciplines across institutional types. 
Relationship of Price and Cost

This study analyzes trends in college costs,

prices, and revenues between 1988-89 and

1997-98. College prices are the tuition and

fees that institutions charge for a college

education, whereas costs are the fiscal

resources expended by institutions to provide

that education.

This study found no close relationship

between increases in prices and costs during

the 1990s for the groups studied (public 

4-year institutions, public 2-year institutions,

and private not-for-profit 4-year institutions). 

Tuition increased faster than most expenditure categories, including instruction, which

is the largest expenditure category at postsecondary institutions. Over the same period,

the proportion of revenue coming from

tuition increased, while other sources of revenue experienced relative decreases (government appropriations for public institutions,

endowment income and private gifts for private not-for-profit institutions). 

Changing Prices at Public Institutions

The factors associated with changing prices

differed for public and private not-for-profit

institutions. For public 4-year institutions,

state appropriations provide the largest

source of educational and general (E&G) revenue, and the “external factor” of declining

state appropriations is the single most important factor associated with tuition increases.

Annual state appropriations decreased as a

proportion of revenue for all public 4-year

institutions during the period studied. 

Changing Prices at Private Not-forProfit Institutions 

At private not-for-profit 4-year institutions,

prices were related to “internal” budget constraints—the increasing cost of institutional

aid and average faculty compensation and

decreasing revenues from non-tuition

resources, such as endowment income.

Additionally, private colleges compete for

students with comparable private institutions and operate within the context of

“external” conditions, such as the availability of state aid, per capita income in the

state (consumer purchasing power), and the

price of attending a public institution in the

same state. 

Unlike the public sector, there is no single

overriding factor consistently related to

tuition or price increases in the private notfor-profit sector.

Instruction Costs and Institutional Aid

Spending for instruction—which on average

constitutes the largest proportion of total

expenditures—generally increased at a slower

rate than tuition, or even decreased. For both

public and private institutions, institutional

aid was one of the fastest growing expenditure categories. 

While the study found no strong relationship between most types of financial aid

and changes in tuition, institutional aid was

positively related to tuition increases at

both public and private comprehensive

institutions.

STUDY OF COLLEGE COSTS AND PRICES, 1988-89 TO 1997-98

VOLUME 1

Percent change in various financial indicators, by type of institution

NOTES: Changes are from 1988-89 to 1995-96 for private not-for-profit institutions and from 1988-89 to 1997-98 for public

institutions. Undergraduate tuition is in-state tuition for full-time, full-year students. E&G signifies educational and general revenue or expenditures. All changes were calculated using constant 1999 dollars.

SOURCE: U.S. Department of Education. National Center for Education Statistics. Study of College Costs and Prices, 1988–89 to

1997–98, Volume 1, figures 3 and 4, pp. vii-viii.

PAGE 4

Public research/doctoral Public 2-year

Private not-for-profit 

research/doctoral

Private not-for-profit 

bachelor’s

Public comprehensive Public bachelor’s

Private not-for-profit 

comprehensive

Percentage point change in 

endowment income and private gifts 

as proportion of E&G revenue

Percentage point change in state 

appropriations as proportion of 

E&G revenue

Percentage point change in tuition 

as proportion of E&G revenue

Average annual percent change in 

scholarships and fellowships

Average annual percent change in 

instruction expenditures

Average annual percent change in 

undergraduate tuition and fees

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0%

http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2002157
NCES commissioned seven papers by nationally recognized researchers and higher education policy analysts to provide an analytical framework for the study of college costs

and prices. The following quotations are

drawn from these papers.

“In sharp contrast to business firms, colleges

operate both as commercial firms, selling their

product for a price, and as charities, giving it

away for social purposes. That a college is

simultaneously [like] a church and a car dealer

significantly affects the way policies work...”

Gordon C. Winston

Professor and Director of Williams Project

on the Economics of Higher Education

Williams College

“Revenue theory of costs:... ‘Each institution

raises all the money it can. Each institution

spends all it raises.’”

Howard Bowen

The Costs of Higher Education: How Much

Do Colleges and Universities Spend per

Student and How Much Should They

Spend? (Quoted in the Dennis Jones paper)

“[The] major influence for public institutions...

is [the] pattern of state appropriations.

“For public institutions...tuition increases

tend to be the revenue source of last resort—

as long as state appropriations are healthy,

tuition increases tend to be minimalized.

“Public sector tuitions in turn affect the market within which private institutions compete

for students. Since both public and private

institutions draw most of their students from

the surrounding geographic area, the competitive environments for private institutions

are often affected by the funding decisions

of... states.

“It is only [at] the most tuition-dependent

private institutions that prices and cost

behaviors are closely linked... It is important

to recognize the direction of causality—the

cost patterns emerge after the revenue constraints are established.

“Pricing is less a function of institutional costs

than it is of revenue streams from other

sources. Market conditions...dictate sticker

prices and the level of price discounting...”

Dennis Jones

President, National Center for Higher

Education Management Systems

“In the public sector, tuition charges are politically determined prices that often bear little, if

any, direct relationship to economic costs.

State officials determine how the costs of

higher education should be divided among students and the general taxpayer... [T]here has

been a steady shift in the last 20 years away

from the taxpayer and toward the student.

“Our language often confuses the discussion,

because when the public rails against

increases in college costs, more precisely they

are railing against increases in college

prices... The result may be confusion between

a shift in burden vs. an increase in college

prices.

“...The public rarely sees or understands the

cuts in appropriations, but they quickly see and

respond to the resulting tuition increases. State

politicians [do not] explain the shift in support

from the general taxpayer to the student.”

David Breneman

University Professor and Dean, 

Curry School of Education

University of Virginia

“An exclusive focus on sticker prices misses

much of the action in higher education pricing. The net prices faced by students are, on

average, substantially below the sticker price.

Gauging affordability of higher education

without attending to the discounts provided

by institutions and the aid provided through

[state and federal] government can be quite

misleading... Far too much discussion of cost

and price issues in higher education ignores

[the] simple but important...fact that most

people don’t pay the sticker price...

“In public higher education...the issue is much

less one of rising costs than of a shifting of

costs from one set of payers to another. The

burden has been shifting from taxpayers to

families.”

Michael McPherson

President, Macalester College

Morton Owen Schapiro

President, Williams College

“...What most parents have in mind when

they give vent to ‘college cost anxiety’...is the

cost that will drive student indebtedness.

Much of this cost, such as room, board, transportation, entertainment, costs of books and

computers, is out of the control of either the

institution or the state or federal government.

“...Student charges at public institutions,

enrolling nearly 80 percent of those attending, are determined by political decisions... In

the tax-supported public sector...these costs

are legitimately a public policy issue.”

D. Bruce Johnstone

University of Buffalo

The State University of New York

Formerly President of the SUNY System

PAGE 5

Public

79.0%

Private,

not-for-profit

15.8%

Private, 

for-profit

5.2%

SOURCE: U.S. Department of Education. National Center for

Education Statistics, Profile of Undergraduates in U.S.

Postsecondary Institutions: 1999–2000.

Percentage distribution of undergraduates:

1999–2000

http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2002158R

STUDY OF COLLEGE COSTS AND PRICES, 1988-89 TO 1997-98

VOLUME 2: COMMISSIONED PAPERS
Over the last two decades, college tuition

has increased at a faster rate than both the

Consumer Price Index (CPI) and median

household income. Adjusted for inflation,

tuition more than doubled at public and private not-for-profit 4-year colleges and universities. During the same period, median

household income grew 27 percent.

Again, cost is the amount an institution

expends to educate a student. Price of attendance is the amount a student and his or her

family pays to attend that institution, and

includes students’ living expenses, in addition to tuition and fees.

Net price is what students and their families

pay after subtracting financial aid awards:

grants (federal, state, institutional, and

other) and loans (both subsidized and unsubsidized). This study considered several categories of net price and net cost, including

the following:

Net Price With Grant Aid: Price 

Minus All Grant Aid

Combined grant aid—state, federal, and

institutional—was sufficient to offset

increases in price of attendance for lowincome undergraduates, those students who

had the highest need and were least able to

afford to pay for an increase in total price

(see graph below). 

Net Price With Grant Aid and Loans:

Price Minus All Grants and Loans

After grants and loans were subtracted from

total price, middle-income students experienced no increase in net price across all

institutions. Increased borrowing enabled

low- and middle-income students to reduce

the average net price they paid.

But while these students paid less out-ofpocket in 1999-2000 than in 1992-93, they

increased their long-term loan indebtedness,

borrowing both subsidized and unsubsidized

loans.

The only group of students who paid a higher net price in 1999-2000 than in 1992-93

were undergraduates in the highest income

quartile, who attended either private notfor-profit research and doctoral institutions

or public 2-year colleges.

What Students Pay for College:

Changes Between 1992–93 and

1999–2000

• Sticker prices increased faster than

inflation

• Net price after all grants did not

increase for low-income students

• Net price after all grants and loans did

not go up due to a large increase in

borrowing by middle-income students

WHAT STUDENTS PAY FOR COLLEGE: CHANGES IN NET PRICE OF

COLLEGE ATTENDANCE BETWEEN 1992-93 AND 1999-2000

*1992–93 and 1999–2000 amounts significantly different (p<0.05).

SOURCE: U.S. Department of Education, National Center for Education Statistics, What Students Pay for College: Changes in the Net

Price of College Between 1992–93 and 1999–2000, tables 7-A, 8-A, and 9, pp. 32–39 (originally published from National

Postsecondary Student Aid Study, 1992–93 [NPSAS:93] and 1999–2000 [NPSAS:2000]).

Change in price of attendance 

minus grant aid

Public 2-year

Income 1992–93 1999–2000

Lowest 25% $6,200 $6,400

Middle 50% 7,400 8,200*

Highest 25% 7,700 8,800*

Public research and doctoral universities

Income 1992–93 1999–2000

Lowest 25% $9,100 $9,100

Middle 50% 10,800 11,700*

Highest 25% 12,000 12,800*

Private not-for-profit research and doctoral universities

Income 1992–93 1999–2000

Lowest 25% $15,400 $16,000

Middle 50% 18,200 20,200*

Highest 25% 23,400 26,000*

0 $1,000 $2,000

Amount

$3,000

200

800*

1,100*

Amount

0 $1,000 $2,000 $3,000

0

900*

800*

Amount

0 $1,000 $2,000 $3,000

600

2,000*

2,600*

Price of attendance minus all grant aid

PAGE 6

http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2002174
The Delaware Study focuses on the instructional costs of academic disciplines, measured by the direct expense per student 

credit hour taught. 

Weak Relationship Between Cost and

Price

Analyses in this study indicate no strong

relationship between cost and price. Price is

largely associated with factors external to

the institution, while cost is driven by internal institutional programs and priorities. 

Key Findings

Two keys findings emerged from the study:

(1) instructional costs of an institution are

determined by the disciplinary mix of that

institution, and (2) costs vary across disciplines within that institution more than they

do within a given discipline (e.g., chemistry)

across institutions.

Figures A and B illustrate these key findings.

Figure A illustrates variation within a discipline across institution types. It reflects cost

per credit hour taught for 5 of the 24 disciplines benchmarked in the Delaware Study.

In chemistry, cost ranges from $181 at comprehensive institutions to $264 at research

universities, an $83 spread. The spread in

English is $28, from a low of $112 at comprehensive institutions to a high of $140 at

research universities. Foreign languages

range from $131 at doctoral universities to

$202 at baccalaureate colleges, a $71

spread, while mechanical engineering ranges

from $316 at doctoral universities to $379

at research universities, a difference of $63. 

Figure B shows considerable variation among

disciplines within an institution. Using the

same disciplinary examples, at a research university, the difference in cost per student credit hour taught between English and mechanical engineering is $239; the difference

between sociology and chemistry is $140. 

Price (sticker price or tuition) is a constant

for all undergraduates at an institution.

Chemistry and engineering majors pay the

same tuition as English and sociology majors.

However, the cost of delivering instruction in

those disciplines varies widely. 

Cost Factors

Instructional expenditures are also tied to

fixed cost factors. In addition to the mix of

disciplines at the institution, costs are a

function of student credit hour production,

department size, and tenure rate. Again,

these costs vary less by discipline across

institutions than they do among disciplines

within an institution.

Economies of scale have the greatest impact

on instructional costs. The more student

credit hours taught per faculty member, the

lower the unit cost. Increasing the size of

that faculty without a corresponding

increase in student credit hour production

increases instructional expense. Increasing

the proportion of tenured faculty—that cadre

of faculty that is better compensated and

that have reduced teaching loads—will also

increase instructional expense. Finally, the

study found that introducing or increasing

the level of graduate instruction and programs raised instructional costs.

A STUDY OF HIGHER EDUCATION INSTRUCTIONAL EXPENDITURES:

THE DELAWARE STUDY OF INSTRUCTIONAL COSTS AND

PRODUCTIVITY

Figure B. Direct expense per student credit hour taught: 

Discipline within institution type, academic year 2001

Figure A. Direct expense per student credit hour taught: 

Institution type within discipline, academic year 2001

Research Doctoral Comprehensive Baccalaureate 0

50

100

150

200

250

300

350

$400

Chemistry English Foreign

Languages

Mechanical

Engineering Research Doctoral Comprehensive Baccalaureate Sociology

Chemistry English Foreign 

Languages

Mechanical 

Engineering

Sociology

0

50

100

150

200

250

300

350

$400

SOURCE: U.S. Department of Education, National Center for Education Statistics, A Study of Higher Education Instructional Expenditures: The Delaware Study of Instructional Costs and Productivity, pp. ix-x.

PAGE 7

http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2002161
At the right is a sample page on the IPEDS

“COOL” web site. Students and their families can

access roughly 7,000 postsecondary institutions

that participate in Title IV federal student aid

programs. IPEDS “COOL” includes 2- and 4-year

public and private not-for-profit institutions as

well as trade schools and technical schools.

Web Links

The IPEDS “COOL” site provides links to 

federal student aid programs and applications,

and to other information about the institution

collected by the U.S. Department of Education.

Pricing

Information on prices includes tuition and

average expenses for the past three academic

years, for both students living at home or

residing on the college campus (i.e., price 

of attendance).

General Information 

Students and families can search the IPEDS

“COOL” site by location (e.g., by the number of

miles from home or by state), by program, or

by degrees or professional certificates offered.

http://nces.ed.gov/ipeds/cool/

IPEDS COLLEGE OPPORTUNITIES ON-LINE (IPEDS “COOL”)