Yes, College Costs a Lot -- But Here's Why It's Probably Less Than You Think

For most families with college-bound kids, the sharp rise in tuition over the past two decades has been downright scary. The price of higher education has more than doubled in the last 20 years—and that's after factoring in inflation. The full tab for tuition, room, board, and fees at the typical private four-year university was just shy of $41,000 for the past academic year; at public schools, the bill ran over $18,000. That's a lot of money.

But, as the New York Times points out, this increase doesn't jibe with reality for one simple reason: Most families don't actually pay full price for college.

The number that matters most is not a college's sticker price (the total cost of tuition, fees, room, board, books, and other expenses) but rather the school's net price—what a student pays to attend after factoring in scholarships and grants. The federal government publishes an average one-year net price for first-time full-time students on its College Navigator site for every college.

Net price is also one of the affordability metrics Money used in creating our own college rankings. But with a twist: Our calculation looks at the total price of getting a degree, from freshman year through graduation, instead of a single year. So in addition to factoring in the aid a typical student will get from each school, we also considered tuition inflation and the time the typical student takes to graduate, since many need more than four years to earn their BA.

Using net price instead of sticker price—whether it's the government's calculation, Money's, or a personalized result from a net price calculator—makes sense of otherwise nonsensical data. If college tuition and fees really rose more than 100% over the last two decades, no one but Warren Buffett's offspring could afford to attend even a mid-priced school.

But when you look at the net price instead of the sticker price, the cost of college has risen only about 40% to 50% over the past 20 years, based on data from the College Board—half of what the sticker would lead you to believe. The cost is still high, of course, but not nearly as bad as the unadjusted numbers suggest.

The following comparison is good way of visualizing how important this distinction is.

If you looked at sticker prices alone, you'd think Columbia was the cheaper school. Over the time it takes to get a Columbia degree, a student would spend $284,029 (taking into account future inflation), and $295,024 studying at Harvey Mudd, assuming he or she paid sticker price. But when you look at net price, the picture completely changes.

Based on the average amount of aid students from each school receive, a person who enrolled in Columbia would actually spend about $19,000 more on average over four years than someone who went to Mudd. You could buy a new car with that kind of money. And often, the differences between similar schools can be even more dramatic. For instance, the difference between the net price of a degree at Columbia, the most expensive Ivy in the Money ranking, and Princeton, the cheapest, is about $60,000. (Money's Best Colleges breaks out both the most expensive schools in our rankings here and the most affordable schools.)

So who actually pays sticker price? At private colleges, families who earn less than about $200,000 may get some need-based aid. For lower-cost public colleges, the income cutoff is typically closer to $100,000 to $125,000. And most schools will award merit grants to students with extraordinary talents or academic achievements, no matter how much their parents earn.

However, it's important to remember the outliers. Elite universities, for example, are a totally different ball game. In general, 40% to 60% of students at top-level schools pay sticker price for their education. For example, only about half of Yale students receive grants from the school to defray the sticker price.

Conversely, there are less selective schools where almost nobody pays full price. At Ripon College, which Money ranked 554th, 95% of students receive scholarships from the school. Looking back to our case study, 51% of Columbia students are paying full price, compared to 29% at Harvey Mudd. Yet at No. 7, Harvey Mudd ranks higher than No. 22 Columbia, partly because it has a lower net price, but also because its graduates reported considerably higher average earnings early in their careers.

Of course, some of a college's total cost also depends on the student. If a Columbia enrollee buys used books, cooks his own food, and makes sure to finish in four years, his final bill will be lower than it could have been. If he goes out every night and takes six years to graduate... well, under those circumstances, any school would eventually get pretty pricey.