The average tuition or the average debt load conveys a lot of important information. But averages can also obscure just how much variation there often is in the cost of higher education. Tuition is a good case in point. Below is a box and whisker plot of tuition at four-year colleges.
A quick refresher on reading a box and whisker plot for those of you who haven’t seen one in a while (skip to the chart and commentary if you recall how to interpret one):
- The thick line in the box gives the median value.
- The upper and lower limits of the box are the 75th and 25th percentiles, which means that middle 50 percent of all observations fall within the box.
- The upper and lower “whiskers” give the range within which almost all data fall.
- Any points outside the “whiskers” are considered outliers.
Taken as a whole, this chart illustrates that there is incredible variation in the tuition that four-year colleges charge. The median tuition is around $15,000, so about half of colleges charge less than $15,000, and about half charge more. We can also see that 25 percent of four-year colleges charge less than about $8,500, and a quarter charge more than about $23,500. We can also see that the whiskers are very long, especially on the upper end, which indicates that many colleges charge tuition far above the middle range.
When we separate out colleges by sector — public, private nonprofit and private for-profit — the tuition distribution reveals interesting differences.
Unsurprisingly, the median tuition at public colleges (~$6,500) is much smaller than at both types of private colleges. What is interesting to note is that only the extreme outliers among public colleges charge as much as the median tuition at for-profit colleges or as much as the 25th percentile of nonprofit colleges. In other words, even highly priced public, four-year colleges charge less than the typical for-profit college or an “inexpensive” nonprofit college.
The wide variety of tuition at private, nonprofit colleges also stands out. The difference in tuition even among the middle 50 percent of colleges is almost $17,000 (compared to around $3,300 at public colleges and $5,500 at for-profit colleges).
But perhaps the most interesting thing to note in this graph is the wide distribution of tuition at for-profit colleges. Normally, price competition should result in a pretty narrow distribution, and such competition should be most evident in the for-profit sector for two reasons. First, unlike the other sectors, for-profit colleges derive very little revenue from non-tuition sources. In contrast, public colleges receive funding from the government and many private nonprofits receive private philanthropy. Differences in public funding and private philanthropy could plausibly affect tuition, so we might expect for tuition to vary more at public and nonprofit colleges with these outside sources of funding.
Second, while higher tuition is used by some colleges as a signal of their quality (recall that “students were more interested in attending a $40,000 school with a $20,000 discount than they were in attending a $20,000 school”), this only really works at the top end of the quality spectrum, and most for-profits are not considered to be at the top end. Since they can’t signal high quality by charging a high price, for-profits could therefore be a bit more ruthless in trying to underprice their competition, leading many for-profits to charge very similar amounts in tuition (resulting in a narrow distribution). In spite of all this, the distribution of tuition at for-profit colleges is fairly wide, which is somewhat surprising.
The main takeaway from these charts is that collectively, we tend to put too much emphasis on the average tuition.