For many families, the first number they look for in a college search is the one that makes them stop searching: the sticker price.
In 2025–26, average annual published tuition and fees reached $11,950 for in-state students and $31,880 for out-of-state students at public four-year universities, $4,150 at public two-year colleges, and $45,000 at private four-year institutions, according to the College Board.
Those figures do not include housing, food, books, and other essentials—costs that often determine whether affordability is real or theoretical. The College Board estimates average annual budgets (tuition plus living costs and other expenses) of $21,320 for public two-year in-district students and $65,470 for private nonprofit four-year students. Public four-year budgets average $30,990 for in-state students and $50,920 for out-of-state students.
At the same time, financial aid has grown—especially aid provided by states and institutions. That reality helps explain why affordability debates can feel contradictory: families hear that most students do not pay full price, yet they still report that cost is the biggest barrier to enrollment.
A large part of the disconnect is embedded in a financing approach that has become common across higher education: “high-tuition, high-aid,” also known as tuition discounting.
A November 2025 analysis by The Century Foundation (TCF)—authored by Peter Granville, Deputy Director of Higher Education Policy, Denise A. Smith, PhD, and graduate intern Jaime Ramirez-Mendoza—argues that today’s tuition-financial aid structure has become increasingly disconnected from affordability, even as total grant aid has grown. In their report, A Better Hundred Billion: Improving State and Institutional College Financial Aid, the authors contend that in many parts of the sector, tuition is intentionally “priced up” and then adjusted downward through grants—often in ways that confuse families, distort institutional incentives, and fail to consistently reduce the financial burden for students with the greatest need.
The “High-Tuition, High-Aid” Model—Why It Can Backfire
In the high-tuition, high-aid system, colleges advertise a high sticker price and then use institutional and state grants to present the net price as reflecting a large “discount.” In language cited by TCF from college leaders, one rationale is that higher prices can signal higher value: “We feel we’ve increased the value proposition to get [families] to be willing to pay more.”
But student psychology can move in the opposite direction. TCF describes a recurring pattern: sticker shock pushes some students away before they learn what aid they might receive, while institutions and states spend substantial grant dollars competing for students who may not actually need the aid to enroll.
Sticker price still shapes behavior. If families interpret a high price as out of reach, they may never reach the stage where financial aid changes the equation.
Where the Money Goes: Need-Based vs. Competitive Aid
TCF’s central critique is not that grant aid is scarce, but that too much of it is poorly targeted. State and institutional grant programs together total close to $100 billion annually, yet TCF finds that a meaningful share goes to students whose grants exceed what they need to cover college costs after accounting for expected family contribution.
One of the report’s starkest findings is that more than half of students from the top income quartile receive grants in excess of need (56%), compared with virtually none (0.2%) among students in the bottom quartile—meaning top-quartile students are 280 times more likely to receive grants above need. Overall, TCF estimates that about 10% of total grant aid is provided in excess of need, amounting to at least $10 billion per year in state and institutional grants.
The report also points to program design choices that can tilt aid away from affordability goals, including a long-term shift toward merit-based aid. The share of state grants awarded based on need has fallen over time, reflecting a growing role for merit-based awards often tied to test scores and GPAs—metrics that can mirror unequal K–12 opportunities rather than family financial constraints.
The State Funding “Balance Wheel” and Tuition Pressure
Affordability is not only about how aid is awarded; it is also about what institutions must charge to cover basic costs. In a recent report, the Bipartisan Policy Center (BPC) describes state higher education funding as volatile and often treated as a “balance wheel” during recessions—cut when budgets tighten and partially restored later.
The evidence BPC highlights suggests that when appropriations fall, costs often shift toward students. In research summarized by BPC, economist Douglas Webber finds that since 1987, each $1,000 decline in state funding per student is associated with an average $257 increase in student costs—through tuition increases, enrollment shifts toward higher-paying out-of-state or international students, and/or reductions in institutional aid.
BPC also notes Webber’s finding that the share of cuts passed on to students has risen over time, from 10.3% before 2000 to 31.8% since 2000.
As Sandy Baum and coauthors write: “Each state has a different composition of institutions and students, a different starting level of tuition, a different ability to attract out-of-state and international students, different capacity utilization, different tuition-setting mechanisms, and different levels of expenditures per student.”
What Can Change: Practical Levers to Improve Affordability
The policy takeaway from these analyses is not that aid should shrink, but that it should work harder for the students it is meant to serve—and that tuition-setting incentives should stop rewarding sticker-price escalation.
TCF argues that states can begin with basic accountability: audits of how grant dollars affect net price burdens by income, how much aid is awarded above need, the balance of need- versus merit-based aid, and whether state dollars disproportionately flow to the most selective institutions. Those audits can inform reforms that shift dollars toward need-based grants that reduce out-of-pocket costs and borrowing for low-income students.
“These lawmakers correctly identify a problem, stating the market is not functioning properly, but they get the cause wrong,” says Granville.
At the institutional level, TCF’s critique points to a related move: re-centering financial aid budgets on access rather than recruitment, so discounts do not function primarily as enrollment-management tools for attracting higher-income students.
For states, BPC’s evidence review implies that stabilizing public investment can relieve some tuition pressure—particularly for broad-access institutions that have less ability to offset cuts by recruiting out-of-state students or raising prices without losing enrollment.
None of these steps eliminates the complexity of higher education financing. But together, they point to a more direct definition of affordability: reducing what families actually pay, not just increasing the size of the discount printed on an award letter.
