Introduction and summary
Recent and historical trends in the cost of college paint a complex picture: While the published cost of attendance (COA) has reached a record high at some schools, the net cost that students pay after grant aid and student loan borrowing has actually declined, on average, in recent years—in part due to steady federal investment and increasing state funding.
However, levels of student debt still remain higher than they were decades ago, and this debt is a significant burden for many borrowers who struggle to make their payments. Furthermore, progress on reducing the cost of college is at risk with the passage of the One Big Beautiful Bill Act (OBBBA) and the Trump administration’s continued attacks on the higher education sector. Bold reforms to stabilize and safeguard federal and state funding for higher education are needed now more than ever.
The cost of college appears to be rapidly rising. Some selective nonprofit institutions now publish total costs of attendance that approach $100,000 per year—a mind-boggling number far beyond the reach of the average American family.1 Meanwhile, more than 43 million student loan borrowers owe an outstanding $1.77 trillion in federal and private student loans.2 These metrics suggest that college is increasingly out of reach for many students without taking on burdensome student loan debt.
However, the total published cost of attendance, also called the “sticker price,” can be deceiving. The sticker price for attending college is about 30 percent to 40 percent higher than the average net cost of attendance—the amount that students actually pay. (see Figure 1) The net cost of college to students has been declining since 2016, and the average loan amount that undergraduates borrow has been declining since 2010. (see Figures 2 and 6)
While both of these metrics have been trending in the right direction in recent years, they are still high from a historical viewpoint. When adjusted for inflation, the average amount borrowed per student is about double what it was three decades ago. (see Figure 4) Student loans remain a hardship for many borrowers, with nearly 1 in 5 borrowers defaulting on their loans.3
Despite the challenges associated with student loans, four-year degrees continue to offer substantial opportunity and economic mobility. In 2022, the median earnings of workers ages 25 to 34 with a bachelor’s degree ($66,600) were about 60 percent higher than the earnings of those with a high school diploma ($41,800).4 For workers who earned a graduate degree, their earnings ($80,200) were nearly double those of high school graduates.5 One study estimates that, even when accounting for the cost of college and foregone earnings during those years, a bachelor’s degree still earns women a net of $1.5 million and men a net of $2.5 million over their lifetimes.6 For workers who go on to attain graduate degrees, this figure rises to $2.1 million for women and $3.2 million for men.7
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Ensuring improved affordability and access to four-year degrees for students from all backgrounds requires more robust federal and state investments in higher education. Ultimately, state and federal governments should work to move away from debt-financed higher education by providing more direct funding to institutions. These types of changes can help foster an education system that offers free and universal access to high-quality postsecondary education.
The One Big Beautiful Bill Act and the Trump administration’s attacks on higher education threaten recent improvements in affordability and create a climate of uncertainty for institutions and students
In July 2025, President Trump signed the One Big Beautiful Bill Act into law. This far-reaching tax and budget legislation passed by congressional Republicans makes significant federal policy changes that will affect the higher education sector.8 While the final bill did not include earlier provisions that would have significantly raised costs for students from low- and middle-income families, such as the elimination of subsidized loans and changes to the definition of full-time enrollment for Pell Grant recipients, its changes to loan and repayment programs will make accessing and paying for college more challenging for those students who need to borrow to attend.9
For example, new loan limits for graduate and parent borrowers will cap the amount of federal student aid that these groups can access.10 While some of those who would exceed these new caps would be able to access private student loans, others may not, depending on their credit history and whether they have a cosigner.11 Those who need to rely on private loans may pay higher interest rates, be afforded less flexible repayment options, and have few or no pathways to debt relief.12 Furthermore, the interest rates available to students will be a result of their or their cosigners’ credit scores, which are shaped in part by inequities such as the racial wealth gap and unequal access to credit due to discriminatory historical practices such as redlining.13
Moreover, the new student loan repayment plan options included in the OBBBA will raise costs and make repayment more burdensome for many borrowers.14 The introduction of minimum payments for the lowest-income borrowers, the extension of repayment timelines by up to 30 years, and the elimination of unemployment and economic hardship deferments for new borrowers will raise the risk of default for borrowers who struggle most.15 Together, these changes will make accessing, affording, and repaying education loans more challenging, with the impacts concentrated on students from lower-income families.
Cuts to nutrition assistance and health care programs will also add costs for states, likely putting pressure on state budgets and potentially forcing cuts to state appropriations for higher education. The OBBBA cuts more than $1 trillion in health care, most of which is from Medicaid, and at least $120 billion from the Supplemental Nutrition Assistance Program (SNAP).16 Studies show that increased state Medicaid spending or other budgetary pressures often correlate with reduced state spending on higher education.17 If history is any guide, public institutions—which are generally the best pathway for an accessible, affordable, high-quality postsecondary education for students from all backgrounds—may see reduced state support and increased tuition to compensate for these losses.
In addition, the Trump administration’s attacks on research and international students will also have downstream impacts on university finances that may lead to increased tuition prices. The approximately $3.7 billion in research grants targeted for cuts represent lost revenue for institutions and may hinder universities’ ability to hire staff, build labs, and purchase technology.18Already, the research grant cancellations have spurred colleges and universities to cut staff or impose hiring freezes.19 Early data suggest that Trump administration immigration policies may be preventing or deterring international students from enrolling in U.S. universities, a trend that could put further pressure on university finances, as international students generally pay higher net prices than U.S. students.20
This report surveys trends in the cost of attendance; federal, state, and institutional grant aid; and undergraduate student loan borrowing to show how, despite improvements in college affordability in recent years, students today pay a greater share of the cost of their postsecondary education than in previous decades. It also highlights how unequal outcomes in student loan borrowing and repayment compromise higher education’s role as an engine of social mobility.
Finally, it argues that policymakers should implement a new federal-state partnership for college affordability, advance more equitable distributions of grant aid that account for differences in household wealth, and build a more robust student loan safety net to help make the vision of higher education as a pathway to the American dream a reality.
Sticker prices, income disparities, and the true cost of attendance
The total published COA—the “sticker price”—includes tuition and fees as well as housing, food, books, and other living expenses.21 High sticker prices can be deceiving, however, as institutions typically provide grant aid—also described as scholarships—to help bring down the total costs students and families must pay. Therefore, the net COA after grant aid is more representative of the actual cost of college.
After accounting for grant aid, the annual net COA was $20,780 for those attending public colleges and $36,150 for those attending private colleges. By comparison, the average total published COA was $29,910 per year at public four-year colleges and $62,990 per year at private nonprofit four-year colleges across the country during the 2024-25 school year.22 (see Figure 1)
The difference between the sticker price and the net COA is sometimes called the “discount rate.”23 The average discount rate in 2024-25 was 31 percent at four-year public institutions and 43 percent at four-year private nonprofit institutions, up from 20 percent and 30 percent, respectively, during the 2006-07 academic year.24 The practice of discounting allows institutions to adjust their price based on what families can afford to pay and offer more generous scholarships to those students they would most like to enroll.
Furthermore, when accounting for inflation, the net cost of attendance at public and private four-year institutions has been slightly declining since the 2016-17 academic year. (see Figure 2) After rising at an average annual rate of 1.6 percent at public institutions and 0.9 percent at private nonprofit institutions between the 2006-07 and 2016-17 academic years, it declined by an average of 1.7 percent per year at public institutions and 1.2 percent per year at private nonprofit institutions from that point until the 2024-2025 academic year.25
The growing gap between the sticker price and the net cost after grant aid may be viewed, at least in part, as a function of income inequality, as it reflects the difference between what average-income families and the most affluent families can afford to pay. High sticker prices allow institutions to charge correspondingly steep prices to students from high-income families, while institutional grant aid brings down the real cost for students from families who earn less.26 For example, in the 2019-20 academic year, both the share of students receiving grant aid and the amount of aid increased as income levels decreased at both public and private four-year institutions.27
Trends in income gains over the past three decades highlight the increasing disparities between higher- and lower-earning families. (see Figure 3) The incomes of families from the highest-earning quintile increased by 54 percent over this period, 17 percentage points more than those of the two bottom quintiles.
Colleges at least partially made up this affordability gap for middle-class families, however. The amount of grant aid awarded increased more for students from lower income quartiles than higher income quartiles between the 2003-04 academic year and the 2015-16 academic year. (see Figure 3) This trend suggests that higher sticker prices were counterbalanced with increased grant aid to make the net price more attainable for lower-income and middle-class students and families.
Given these dynamics, college affordability proposals that include total price caps should be approached with caution. Such proposals may prevent institutions from receiving revenue from the high-income families who are able to pay these high prices, which would hinder their ability to offer grant aid to students from lower-income families.
Trends in student loan borrowing for four-year degrees
Much of the concern about rising college costs stems from student loan debt, both the collective size of the portfolio—the investment it represents on behalf of taxpayers—and the levels of debt that in some cases create financial hardship for individual borrowers. While the share of undergraduates with student loans and the average loan amount have declined slightly in the past decade, students still shoulder a larger burden to finance their education today than in earlier generations.
Between the 2010-11 and 2020-21 academic years, the share of students attending public four-year institutions who borrowed student loans declined from 51 percent to 37 percent, while the share at private nonprofit four-year institutions declined from 64 percent to 53 percent.28 Similarly, the average annual loan amount for student loan borrowers at public four-year institutions has decreased by 4 percent when adjusted for inflation, from $7,815 to $7,492 per year in constant 2021-22 dollars.29 Students at private nonprofit four-year institutions borrowed 5.8 percent less over the same time period, down from $9,318 to $8,776.30 This downward trend is due in part to more robust state investments in higher education as states recovered from the Great Recession and by federal pandemic-era stimulus efforts in 2020.31
However, an even longer historical view shows that the average federal loan is still nearly double what it was 35 years ago. This measure increased from $2,087 in 1990-91 to $3,895 in 2023-24—an 87 percent increase.32 (see Figure 5)
Inflation, labor, and the cost of college
Over the approximate 50-year period between the 1973-74 and the 2024-25 academic years, tuition and fees increased by almost 220 percent at public four-year institutions, from $3,610 to $11,610, and by 200 percent at private nonprofit four-year institutions, from $14,500 to $43,350.33 While some analyses point to “administrative bloat” or increased access to federal loans as potential causes of this increase, evidence does not fully bear these claims out.34
Rather, growing labor costs are the primary driver of increased college costs, as faculty and staff salaries and benefits together account for approximately 57 percent of an institution’s expenses.35 The postsecondary labor force is highly educated, and postsecondary institutions must offer employees relatively high salaries in order to compete with jobs in other sectors.36 In general, the cost of services rises faster than the cost of goods in a developed economy, as goods can benefit from gains in efficiency that services generally cannot, a phenomenon known as the Baumol effect.37 (Imagine, for example, improvements in manufacturing that lower the cost of producing cars compared with the efficiency limits of child care, as the number of children one caregiver can safely look after remains fixed.)
One metric that seeks to capture the inflationary costs the higher education sector faces is the Higher Education Price Index (HEPI). The HEPI measures a “market basket” of costs that colleges and universities require for their operations, from salaries and benefits to utilities, supplies, and other services.38 Since 1983, the HEPI has increased about 310 percent, while the consumer price index—the measure of inflation on consumer goods and services—has increased about 215 percent.39 In many ways, American higher education—particularly the four-year, residential experience—is a relatively expensive product in which the services of highly trained professionals and the operational costs of academic, residential, and extracurricular activities are bundled together. The payoffs for both individuals and society, however, outstrip these costs.
Furthermore, increases in the share of expenditures going to wraparound services for students—such as academic support, counseling, and other campus services—are not necessarily inefficient, as they contribute to improved graduation rates.40 The share of completions per dollar spent increased between 2012 and 2022, suggesting that the increased spending on student services frequently pays off, since students who complete their degrees see a much greater return on investment than those who do not.41
Shifting costs to students: The declining purchasing power of the Pell Grant and fluctuating state funding
As tuition prices increased by between 200 percent and 220 percent over the past 50 years, the Pell Grant—the foundation of need-based federal financial aid—did not keep pace. The maximum Pell Grant award increased only 140 percent, from $3,120 to $7,395, adjusted for inflation.42 The declining purchasing power of the Pell Grant over this period has driven part of the increased reliance on student loans.
Meanwhile, state and local funding for higher education has fluctuated over the past 3 1/2 decades. State funding declined sharply during the economic downturn following the 2008 financial crisis. (see Figure 6) State and local appropriations make up a significant share of funding for higher education—particularly for less research-oriented and more teaching-focused institutions, accounting for 26 percent of revenue at public doctoral, 37 percent of revenue at public master’s, and 41 percent of revenue at public bachelor’s institutions.43 Institutions that offer higher level degrees tend to rely relatively more on research funding, which is primarily distributed by the federal government.
In more recent years, institutional grant aid has been rapidly increasing, while student loans have decreased and federal and state support have stayed relatively steady. Institutional grants have increased by about 20 percent since 2008-09, while the average Pell Grant award has increased 15 percent and state and local grant funding have increased 14 percent.44 By contrast, the average amount borrowed in student loans has declined by 33 percent.45 Improvements in the purchasing power of the Pell Grant in the 2010s are due in part to the Health Care and Education Reconciliation Act of 2010, a budget reconciliation bill passed by congressional Democrats, which indexed the maximum Pell Grant award to inflation from the 2013-14 academic year through the 2017-18 academic year.46
Together, these trends suggest that reliance on student loans at the undergraduate level is slightly declining as federal and state investments in college affordability move in the right direction. Institutional grant aid is an increasingly important means by which institutions help students from low- and middle-income families afford college.
The wider historical angle suggests that, in the long view, undergraduate students still shoulder a larger share of the financial burden for their undergraduate education than they have in previous decades. The reduced purchasing power of need-based federal aid such as the Pell Grant relative to previous decades creates challenges for students with the most need.
While the total COA at four-year colleges and universities may cause sticker shock, much of this total cost is mitigated by institutional grant aid for families with financial need. Continuing to build robust federal and state investments in four-year colleges can help to ensure that four-year degrees become more affordable and accessible to students from all backgrounds.
After graduation: Unequal outcomes in student loan repayment
Students who successfully attain a four-year degree can enjoy considerable economic and career opportunities. While a bachelor’s degree remains a smart investment with a large payoff for many graduates, for others it becomes a burden as they struggle to repay their loans. While about 60 percent of bachelor’s degree earners who did not attend graduate school pay off their student loans within 10 years—the length of the standard repayment plan—about 40 percent do not.47 For Pell Grant recipients, this number rises to 50 percent.48 Those with remaining balances 10 years after graduation have a median outstanding balance of about $22,000, and Pell Grant recipients have a median balance of $29,000.49 Among Black or African American borrowers, 66 percent still have student debt at the 10-year mark, owing a median of nearly $40,000.50
These statistics represent student borrowers who have completed their bachelor’s degrees. Those who did not complete their degrees are generally worse off across the board: They are more likely to default, repay their loans more slowly, and face worse financial outcomes.51
Even though undergraduate student loan borrowing has slightly declined in recent years, it remains a burden for many borrowers who struggle to repay their loans. The financial aid and repayment systems must better target borrowers who face the greatest challenges in affording college and repaying their loans, while federal and state investments must continue to grow to continue to bring down the real cost of college.
Stabilizing and sustaining higher education funding through a federal-state partnership
Investing in four-year college degrees yields dividends for both individual and societal outcomes. Bold reforms are needed to broaden opportunity. Many progressive researchers and advocates agree that a policy agenda for universal access, broad affordability, and economic mobility in higher education still must center a vision of free or debt-free college.52 Much of the disillusionment with higher education stems from the dysfunction and harm caused by the increasing burden of student debt over the past few decades, but most Americans still see the value of higher education even as they are critical of student loan debt.53 The increased earning potential and broader access to higher-quality jobs that a four-year education affords endure.54 These benefits extend beyond individuals: College graduates grow the economy, pay more in taxes, have better health outcomes, enjoy lower unemployment rates, have higher life expectancies, and are more civically engaged.55
In order to make access to college a reality for all, policymakers should work toward a new federal-state partnership to ensure that federal and state investments in higher education are stable, sustainable, and equitable. A variety of proposals and models exist, including Sen. Bernie Sanders’ (D-VT) 2017 College for All Act and Sen. Brian Schatz’s (D-HI) Debt-Free College Act.56 Previously, the Center for American Progress proposed the Beyond Tuition model, which included interlocking affordability, quality, and accountability guarantees.57 All of these models include some combination of free tuition for students and families—in some cases with income requirements; grants for living expenses; and state matching funds.58 These proposals ranged in price from $60 billion to $96 billion per year at the time of publication of the CAP proposal in 2018.
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A federal-state partnership would help stabilize state contributions to higher education costs, which often declines during recessions. This new model could also better account for differences in household wealth, which likely contribute to the disproportionately poor student loan outcomes of Black students and have spurred calls for a supplemental wealth-based Pell Grant.59 It could also pursue more equitable distributions of funding for institutions that serve students with the greatest need, including minority-serving institutions and mission-based institutions such as historically Black colleges and universities and Tribal colleges and universities.60 For those students or families who have borrowed in the past or who, under certain models, would still need to borrow, a robust student loan safety net should exist to cushion individuals from the harms inherent in a financing system that asks individual students to shoulder the risks of the educational investment. This would include flexible, affordable repayment plans with strong protections and discharge options for students who were misled or defrauded by their institutions or who experience significant, ongoing financial hardship as a result of their loans.
Conclusion
Despite significant costs for students and families, a four-year degree continues to offer graduates meaningful economic mobility. The costs to students and families have fluctuated in response to the amount of state and federal funding available, and steady funding over the past decade has contributed to declining net costs and average levels of student borrowing, though student loan debt remains an obstacle for many graduates—particularly those from low-wealth backgrounds. This analysis confirms that since the majority of higher education expenditures are labor, residential four-year college costs have risen faster than the general rate of inflation.
The limited improvements in declining net costs are threatened by the Trump administration’s attacks on the higher education sector, new changes to federal financial aid programs, and cuts to federal nutrition and health care programs that will put increasing pressure on state budgets. To ensure that a postsecondary education remains available to students from all backgrounds, policymakers should pursue a federal-state partnership, which can finally make debt-free college a reality.