The only constant is change

North Carolina is justifiably proud of the low tuition tradition at its public universities. It is even enshrined in the state’s constitution. Educational costs matter—not just to students and parents, but to the economic and civic health of a state. But while the commitment to low tuition is real, it’s no longer sufficient.

Evidence from other states shows that strategic investments in institutional priorities and in financial aid matter more to students–and to institutional stature–than does reliance on historical reputations, uneven subsidies, and institutional cross-subsidization.

Using the vast IPEDS data system, with numbers reported by the institutions themselves, I estimate the sticker price—the total attendance cost, including tuition, fees, books, and room and board—and the net price—what families really pay—at selected public and private universities, both in and outside North Carolina.

The variations are striking.

Sticker price and what families really pay

Most students don’t pay full sticker price. Net price depends on family income and on institutional resources such as financial aid or scholarships. Students from lower-income families typically pay far less than sticker price. Students with higher incomes face higher outlays—but often less than sticker price.

Major private universities have large endowments and donor support, allowing them to discount aggressively. Public universities also rely on donors and endowments but depend more heavily on state policy choices.

Some states make those policy choices explicit. Florida and Georgia, for example, have invested in statewide grant and scholarship programs that reduce what resident students with good grades pay. North Carolina does this unevenly, cross-subsidizing perennially under-enrolled campuses and offering targeted aid programs, but without the same broad impact.

Private universities

Consider first private universities. As illustrated below by these six elite institutions, the gap between sticker and net prices is significant in the private sector.

For example, the total annual cost at Stanford University is $94,000. But a student from a $50,000–$75,000 income family pays $1,500, or 2% of sticker price. Across these six institutions, lower-income students pay 20% of sticker price and higher-income students (above $110,000) pay 61%.

Public universities

Public universities start with lower sticker prices—but offer smaller discounts. The 14 major research public universities listed below, in order of the percent of sticker price paid, are illustrative. Lower-income in-state students at these institutions pay 26–60% of sticker, higher-income students between 61–96%.

NC State and UNC sit near the bottom because their in-state students pay closer to full sticker price. By contrast, several other states, e.g., Florida, Georgia, and Michigan, offer larger discounts and more economic assistance. Residents of those states pay less as a percentage of sticker price, and generally also pay less in absolute amounts.

A comparable review of the UNC system’s 16 institutions shows that in-state students with lower family incomes pay between 40 and 70% of sticker price. The UNC systemwide average is 61%, compared to 45% for the 14 universities above. Higher income NC students pay between 80 and 100% of sticker price, with the systemwide average at 92%, compared to 81% above.

Reliance on reputation isn’t a strategy

Florida and Georgia have made thoughtful choices by reducing net prices for residents and encouraging strategic investments in higher education–cutting administrators, boosting faculty salaries, and recruiting selectively. Payoffs are visible in enrollment strength and in national institutional stature.

Regarding institutional stature, the prestigious Association of American Universities (AAU) is composed of 71 American universities at higher education’s vanguard. Member institutions influence what is taught and what is studied nationally and internationally and help shape policies for research and scholarship. For nearly a century, Carolina and Virginia were the only public AAU member universities from the South.

Today there are five universities from Georgia and Florida in the AAU, two private and three public. Duke and UNC remain the lone AAU members from North Carolina.

This is remarkable.

Ironically, when Florida and Georgia were reassessing their university systems in the 1970s and 1980s, their leaders frequently visited Chapel Hill to study North Carolina’s model. North Carolina’s universities are strong, but reliance on reputation isn’t a strategy.

As Heraclitus observed 2,500 years ago, nothing stays the same—you either get better or you fall behind.

Dr. Art Padilla splits his time between homes in Wrightsville Beach and Raleigh. He served as a senior administrator at the University of North Carolina System headquarters and later at NC State, where he was chairman of the Department of Management. He has taught at UNC-Chapel Hill, NC State, and the University of Arizona, winning several teaching awards and recognitions, including the Holladay Medal, the highest faculty honor at NC State.