Are Selective Private and Public Colleges Affordable?

Abstract

We examine college affordability under the existing pricing and financial aid system that awards both non need-based and need-based aid. Using data of freshmen attending a large number of selective private and public colleges, we find that the prices students actually pay for college have increased over time. Need-based grant aid has not kept pace with the substantial increases in non need-based aid. Most importantly, although low-income students received more subsidies than higher-income students, the existing financial aid system does not provide enough affordability to needy students. Nonetheless, the deficiency cannot be attributed to the increases in non need-based aid.

Keywords: College affordability, financial aid, public/private colleges

JEL Classification: I21