College Living Costs Estimates Vary Widely
A new study of over 5,000 colleges finds wide disparities in how institutions estimate the cost of attendance, raising questions about affordability and financial aid.
This article originally appeared in Inside Higher Ed, written by Joshua Bay.
As students and families increasingly question the value of higher education, understanding the full cost of earning a college degree has become an important part of the affordability debate.
Federal law requires colleges to include estimated housing, food, transportation and other living expenses in their published cost of attendance, including for students living off campus. These allowances are generally estimates rather than carefully calculated charges from the institution, but they help determine financial aid limits and underpin measures such as net price and unmet need.
New research released today by the Hildreth Institute compared the published living-cost allowances at 5,235 colleges against consistent external benchmarks based on local housing, food, transportation and other expenses. It found that colleges serving students in the same local markets often publish markedly different living-cost estimates, making it harder for students and families to compare college costs and assess affordability.
Bahar Akman Imboden, managing director at the Hildreth Institute, said inaccurate or inconsistent living-cost estimates can have implications beyond students’ initial college decisions, potentially affecting their access to financial aid and ability to cover essential expenses.
“Colleges aspire to appear affordable,” said Akman Imboden. “College affordability cannot just be measured on whether students perceive college to be affordable at the time of entry. It must also account for whether that student has the resources to persist and complete.”
Uneven living-cost estimates: The research includes three reports—a primer, an analysis of living-cost estimates and an examination of standardization—as well as an interactive dashboard that explains how colleges develop living-cost estimates, how they compare with local costs and how institutions coordinate their approaches.
The analysis examined two reported categories: food and housing, and “other expenses,” which includes transportation and miscellaneous personal costs. It focused on full-time, first-time undergraduates living off campus, but not with family.
Key Findings From the Hildreth Institute
1. Living-cost estimates vary widely across institutions.
In some cases, colleges in the same geographic areas publish markedly different living-cost allowances, while others report identical amounts despite differences in local living costs. About half of institutions reported allowances more than 20 percent above the benchmark, while fewer than one-quarter fell within 10 percent.
Other estimates came in substantially below the benchmark. Researchers cautioned that differences from the benchmark do not necessarily indicate whether an institution’s allowances accurately reflect individual students’ needs.
2. Differences in estimates can be linked to institutional characteristics.
Higher-tuition and more selective colleges were significantly more likely to estimate “other expenses” well below the benchmark.
Researchers suggested these institutions may be sensitive to how additional living expenses affect their published total cost of attendance, particularly given the discretion colleges have in defining and estimating miscellaneous expenses.
3. Geography plays a significant role.
Among four-year institutions, colleges in smaller towns and rural areas were more likely to estimate food and housing costs well above the benchmark, potentially reflecting limited housing availability near campus.
At the same time, institutions in these areas were significantly more likely to estimate “other expenses” below the benchmark, raising questions about whether transportation allowances adequately reflect the costs of living in car-dependent communities.
4. Developing consistent estimates presents challenges.
Colleges must account for differences in local housing markets, transportation needs and students’ individual circumstances, often with limited staffing, data and resources.
While states, systems and associations use shared data, model budgets and coordinated methodologies to improve consistency and reduce administrative burdens, researchers found that standardization does not necessarily produce estimates that accurately reflect local costs.
Beyond the estimates: Akman Imboden said part of the challenge of developing accurate living-cost estimates is that financial aid administrators are required to create a standard budget, often with limited guidance and resources, for students whose circumstances can vary considerably.
“Two colleges may have access to the same actual accurate local data on rentals, but one assumes two students share a two-bedroom apartment, while the other assumes four students share the same kind of two-bedroom apartment,” Akman Imboden said. “This results in housing allowances that can be dramatically different, and of course, that’s assuming that financial officers have easy access to such data.”
Akman Imboden noted that unexpected expenses and unmet basic needs can create serious barriers to persistence and completion. Although the study does not directly measure those outcomes, she said it raises questions about what happens when the living-cost allowances students use to plan for college do not reflect the expenses they ultimately face.
“There is a very legitimate concern there that higher-cost living allowance could make an institution appear less affordable and potentially discourage enrollment,” she added. “A budget that is too modest can make a college appear more affordable … so a student may enroll, even take out a loan based on this initial picture, only to discover that their actual expenses are beyond their means.”
“If those financial pressures prevent students from completing, then we risk the most troubling kind of outcome of higher education, which is debt without a degree,” she added.
Jeremy Thompson, research director at the Hildreth Institute, said colleges are not generally required by the federal government to publicly explain how they calculate individual components of their cost of attendance estimates. While some institutions and systems publish their methodologies, many do not, making it difficult to understand what drives differences between colleges.
He pointed to the study’s geographic findings, which showed that colleges in smaller towns and rural areas tended to report food and housing allowances above the benchmark but estimates for other expenses below it.
“It’s possible that a concentrated student population in a rural area with relatively scarce housing is competing for a limited supply of housing close to campus,” Thompson said. “But we need more transparency to understand how schools are calculating it to really drill down on what accounts for that difference.”
Toward greater consistency: Approaches to coordinating and standardizing cost of attendance estimates vary considerably by state. In Colorado, statewide budget parameters help reduce variation but may not fully reflect differences in local costs, according to the study. California uses shared survey data and different system-level approaches, including centralized methodologies that produce campus-specific budgets.
Louisiana has voluntary model budgets developed by the state financial aid administrators’ association, while the City University of New York system uses centrally determined budgets informed by local cost data.
At a time of heightened concern about college affordability and public trust, the findings underscore the importance of clearer and more comparable cost information. The report notes that the FAFSA Simplification Act restored the U.S. Department of Education’s authority to regulate most cost of attendance components beyond tuition and fees, creating an opportunity to consider what should be standardized across colleges and what should remain responsive to local costs and individual circumstances.
Thompson said the goal should be to standardize the methodologies colleges use rather than require institutions to report identical living-cost estimates.
“If you put out there a standard set of assumptions that schools are expected to use, and then issue some suggestions for how to factor in adjustments, then you create flexibility within a consistent framework,” Thompson said.
Akman Imboden emphasized that even with more consistent methodologies, institutions must account for the different financial circumstances of the students they serve.
“One budget cannot fit every student, and at the minimum, we owe students a clear explanation of what that budget assumes and a meaningful way to address the circumstances it does not capture,” she said. “If we are really serious about improving student success, we need to understand the financial realities of the students we actually serve.”