Preston Cooper explores a key factor in rising college tuition costs.
Most prospective college students say that tuition is unfairly high—and they are correct. The cost of college has not just risen above overall inflation; it has risen more than virtually every other consumer good and service. Unsurprisingly, many families are worried about how they will pay for college—and some are starting to conclude that college may not be worth it at all.
At the heart of rising college costs is the fact that prices are not transparent. Unlike shopping for most other products, comparing prices and hunting for the best deal is nearly impossible in higher education because prospective students can rarely figure out ahead of time how much they would have to pay. This gives colleges more market power to charge higher prices, since by the time students receive their tuition bills, they have few alternatives.
All this is made possible by “tuition discounting,” which occurs when colleges publish an outrageous sticker price and then offer students grants and scholarships to bring it down. While cloaked in a benevolent aura—who doesn’t like a scholarship?—tuition discounting has made college prices hopelessly opaque. Government subsidies exacerbate things, as colleges take advantage of taxpayer largesse to hike tuition and cut back on institutional aid.
Fortunately, the 2025 One Big Beautiful Bill Act (OBBBA) has taken initial steps toward mending the broken system. But much more work remains to be done. Thoughtful policymaking can improve price transparency and competition in higher education pricing and restore the dysfunctional financial aid system to its original purpose. That process must begin with understanding how the ostensibly noble practice of tuition discounting became broken in the first place.
The so-called sticker price that colleges advertise on their websites—a price that now exceeds $100,000 a year at some elite institutions—is not the price that most students will ultimately pay.
