"No More Surprises: Reforming College Pricing for Students and Families"

House Subcommittee on Higher Education and Workforce Development

2025-09-16

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Summary

This hearing of the Subcommittee on Higher Education and Workforce Development focused on the urgent need for transparency in college pricing and financial aid to empower students and families in making informed decisions about higher education. Witnesses highlighted how the current opaque system, marked by deceptive practices and confusing terminology, contributes to student debt, dropouts, and an overall erosion of trust in post-secondary education.[ 00:28:05-00:28:10 ]

Themes

Lack of Transparency and Deceptive Pricing Practices

The process of determining the true cost of college is often "clouded in mystery," with institutions advertising prices that bear little resemblance to what families ultimately pay.[ 00:12:06 ]

Aid packages frequently contain unclear or deceptive figures, a practice not typically found in other major financial decisions like buying a home or car.[ 00:12:33 ] A key deceptive practice identified is "unfunded discounting," where colleges set artificially high sticker prices to create an inflated perception of value and offer large, impressive scholarships.[ 00:28:11-00:28:16 ] This scheme often results in some students unknowingly subsidizing the scholarships of their classmates, particularly higher-achieving students, leading to overpayment and excessive debt for others. Despite being an "open secret" within the industry, students and parents are largely unaware of these practices. Enrollment management consultants use sophisticated data modeling to pinpoint individual student pricing, raising ethical concerns about colleges acting against the public good despite their nonprofit status. Furthermore, institutions exploit FAFSA data, including parental income, assets, and college ranking preferences, to engage in detailed price discrimination.

Impact on Students and Families

The lack of transparency has serious consequences, with studies showing that unexpected costs are a leading reason for students dropping out of college.[ 00:13:16 ]

Many families are blindsided by hidden expenses, leaving borrowers without degrees but burdened with debt.[ 00:13:28 ] Low-income, first-generation, adult learners, and middle-income families are disproportionately affected, often lacking the experience or financial resources to navigate the complex system. Cost perceptions significantly influence persistence and completion rates, with many vulnerable students incurring the highest costs in lost opportunity. Families need predictable costs, as currently, tuition and aid can change dramatically year-to-year, and financial aid offers can be misleading, listing loans as if they were grants.[ 01:06:07-01:06:28 ]

Proposed Solutions and Reforms

Solutions within reach include establishing standardized financial aid offers to ensure accurate comparison of college costs. Improvements to net price calculators are needed to make them more accountable, accessible, and user-friendly, as current calculators are often difficult to find and not comparable across institutions. The concept of maximum price guarantees, where families know the most they will pay for a degree from day one, is also being explored. The "Understanding the True Cost of College Act" is proposed to provide clear, comparable, and honest information to consumers. Additionally, the bipartisan "College Transparency Act" and maintaining the Department of Education's financial value transparency rule are critical for students to see which programs provide a return on investment before enrolling. Recommendations also include standardizing financial aid terminology, making compliance a condition of Title IV participation, and forbidding price controls.

Role of Government and Institutional Practices

While greater price transparency is essential, it alone will not address the root causes of the college affordability crisis, which has been exacerbated by congressional Republicans. Policies have been criticized for forcing students into unaffordable repayment plans, pushing them toward predatory private loan markets, and reducing access to Pell Grants. Cuts to the Department of Education staff, particularly in the Office of Federal Student Aid and the National Center for Education Statistics (NCES), compromise the ability to provide necessary information and enforce accountability.[ 01:17:31 ]

[ 01:18:21 ] Institutional practices such as tuition discounting and aid displacement make the system more opaque, with some colleges using institutional aid to attract wealthier students rather than supporting low-income students. The federal loan system is seen as perpetuating unfunded discounting by providing fungible money that reduces colleges' need for cost-efficiency.

Broader Context of Higher Education Value and Affordability

The cost of college has risen significantly, with tuition for public university systems in some states increasing by hundreds of percentage points, while the net price for students has been relatively flat or declining.[ 01:19:38-01:19:44 ]

This divergence is partly attributed to higher education being a "credence good," where its value is difficult to assess even after consumption, leading colleges to compete on prestige rather than efficiency. While colleges often claim declining state funding, data suggests overall state funding for higher education has been increasing over decades. Questions were raised about the appropriate percentage of students pursuing a four-year degree versus other paths like trade schools, given the potential for graduates to be underemployed.[ 01:30:22-01:30:24 ] The discussion also touched upon the impact of cuts to safety net programs like Medicaid and SNAP, which could force states to further reduce higher education funding and raise tuition.

Tone of the Meeting

The tone of the meeting was largely serious and concerned, reflecting the gravity of the issues surrounding college affordability and student debt.[ 00:13:16 ]

[ 00:20:16 ] There was a strong sense of urgency among members and witnesses regarding the need for immediate and effective reforms to protect students and families from deceptive practices. While there were moments of bipartisan agreement on the need for transparency, clear partisan divisions emerged regarding the causes of the affordability crisis and the efficacy of recent legislative actions, particularly the impact of the Trump administration's policies on student aid and Department of Education resources.[ 00:44:46 ] Despite the challenges, there was an expressed commitment to innovative legislative solutions to ensure a better future for students.