Average Net Price is Declining – Why Optimizing Financial Aid is Critical
In the ever-evolving world of higher education, one of the most pressing concerns for students and families is the cost of earning a degree. Rising tuition rates often dominate headlines and spark debates about affordability. Yet, recent insights from The College Board tell a more nuanced story: despite the increase in published tuition prices, the net price on average has declined in recent years. We used IPEDS data to validate this finding and demonstrate to our institutional partners why this is an important headline to pay attention to.
This dynamic creates both opportunities and challenges for colleges and universities. Institutions that lack a strategy for targeting institutional awards effectively risk falling behind in enrollment and revenue generation. It is crucial to optimize financial aid allocation to remain competitive without undermining long-term financial health. Here’s a breakdown of why optimizing financial aid allocation is more critical than ever.
How Much is Net Price Declining and Why Does It Matter?
Net price is the true cost that students pay to attend college, factoring in all forms of financial aid, including scholarships and grants. For many families, the net price is far more relevant than the sticker price when making college decisions. Institutions that can offer competitive net prices often gain a significant edge in attracting students.
According to the College Board, the average net price for new entering freshman at private nonprofit universities in 2024-25 was $16,510 compared to $19,330 in 2006-07, after adjusting for inflation. The average net price for new entering in-state freshman at public four-year institutions was $2,480 in 2024-25 compared to $4,340 in 2012-13, after adjusting for inflation.
This means that the students who are enrolling are being offered more institutional awards and state and federal grants, indicating increased student price sensitivity. This is driving the average net prices down and revealing a shift in the higher ed market with demand down and price sensitivity up overall.
Understanding Regional Markets
This is a trend that we are seeing in different regions across the country and for both private and public institutions. The following are figures we regularly generate for our partner institutions from IPEDS data to understand the partner’s position within their market. These are two examples representing the distributions of published prices and net prices for public and private institutions in two different regions in the US.
These figures are consistent with the College Board’s findings that as published prices have continued to rise, the average net prices across these markets have stabilized or even began to decline. These prices have not been adjusted for inflation over time, as the College Board’s metrics have been.
The College Board indicated that net prices topped out in 2019, but it appears that depending on the region and institution type, prices may have hit a maximum as early as 2016 or 2017.
The distribution of published and average net prices for institutions from 2011 through 2022, with Mid-Atlantic and Southeast 4-year publics on the left and Great Lakes and Plains four-year private institutions on the right.
Granted, this does not mean that the cost of college is now more affordable to families as the Consumer Price Index has increased by 23% from 2019 through 2024. Overall, the economic strain on families is heightened and this is inevitably going to continue to impact the higher ed market. This trend underscores a growing need for smarter financial aid strategies. Simply increasing aid allocations to match the market, without a clear plan can erode institutional revenue and fail to yield desired enrollment outcomes.
The Importance of Financial Aid Optimization
Optimizing Net Price to Increase Overall Net Revenue
Continuing to apply more funds to institutional awards across the board is going to have a direct impact on the net tuition revenue per student. This is a true optimization problem where we can decrease the net price per student, as long as that yields enough new students to increase overall net revenue for the institution. Small changes to award levels can have a significant impact on the bottom line. Both merit- and need-based institutional awards should be optimized annually, particularly when state funding policies are changing rapidly and directly impacting your applicants.
Changes in State Aid are Impacting the Class Composition
When states like Indiana issue cuts to state grants mid-enrollment cycle, it is important to understand which individual applicants are going to be impacted by these cuts, by how much, and what that will do to the overall cohort. Your financial aid strategy should be set up in a way that simulations can be run on the fly; to understand the potential impact of external funding changes, identify strategies to make up for the reductions, and still meet enrollment goals for the year. This is critical to support our most financially at-risk students.
Supporting the Over-Looked Middle Class
In many states, the funding for the lowest income families has improved significantly in the last decade. Additionally, the simplified FAFSA should increase access to funding for many families as well. Many of our institutional partners bring up challenges with enrolling and supporting middle class or upper middle-class families that are receiving a lot less in state grants. A truly differentiated pricing strategy that considers the price sensitivity of this student segment that traditional receive less in state grants, is critical for the overall picture.
Competing Effectively in a Changing Market
Institutions that fail to monitor how net prices compare to their competitors’ risk losing market share. In a market where net prices are stabilizing or declining, universities need to ensure their aid strategies remain competitive to avoid becoming overpriced in students’ eyes.
Conclusion
Colleges and universities face a pivotal moment. As the gap between published prices and net prices widens, institutions that rely on outdated financial aid practices may fall behind. Optimizing financial aid allocation isn’t just about giving more—it’s about giving smarter. Institutions that adopt data-driven strategies to offer competitive net prices, retain students, and manage revenue effectively will be best positioned to thrive in an increasingly competitive and cost-conscious market.
The bottom line? It’s time for higher education leaders to move beyond broad discounting strategies and embrace financial aid optimization as a critical lever for future success.
The SightLine team believes it is critical to not only develop the right financial aid strategy to meet your institution’s enrollment and financial goals, but to also accurately communicate those prices to students early in the enrollment cycle. We have partnered with Meadow to provide a full financial aid optimization package to our university partners that includes a modern student-centered net price calculator.
To learn more about financial aid optimization and how we can support your institution, use our contact page for an introductory call with the SightLine team.
