Why Is Paying for College So Complicated?

Saving and paying for college is an endurance test, a forced march on an often 50-year parade, where strange numerical codes and senseless jumbles of letters mark a route that Waze can’t map.

Begin at age zero or earlier with a 529 college savings plan for your child, born or not yet so. As kids hit the teen years, consult colleges’ net price calculators (N.P.C.) to see how much financial aid they might get.

Then, fill out the FAFSA, which stands for “Free Application for Federal Student Aid,” and determine your student aid index (S.A.I.). The primary FAFSA output used to be known as the E.F.C., or “Expected Family Contribution,” but a recent legislative effort aimed at “simplification” replaced one acronym with another.

Admitted to a great school? Good, but the grant money it offers based on that S.A.I. or other data or the figures that another form, the CSS Profile, belches out is probably not enough to make college affordable. So you could apply for a federal PLUS loan for parents, which might take you 25 years to repay.

As the acronyms pile up, parents may feel the urge to back up and ask a perfectly reasonable question: Why does it have to be like this?

The complexity comes from countless numbers of well-meaning people — inside government and out — who have made incremental improvements over decades to increase access to higher education. Because a college degree can add plenty to a person’s lifetime earnings and wealth if they finish their degree and haven’t taken on too much debt, it’s good public policy to try to make it more affordable for more people.

But as income inequality increases and college costs rise, each new collection of freshmen requires ever more help. More counselors, programs, regulations and relief lead almost inevitably to conflicting advice, new rules, strange loopholes and bad actors.

“We don’t have anything even remotely resembling a coherent system of higher education in this country,” said Brian Rosenberg, the president emeritus of Macalester College and a visiting professor at the Harvard Graduate School of Education.

To wit: Unlike many countries around the world, the United States lacks large, easily accessible national public universities. Instead, states developed their own flagship schools and regional offshoots, and the extent to which they subsidize their residents waxes and wanes as political considerations shift and the economy hiccups.

So even though Americans have lots of choices — including community colleges that will let most anyone enroll — they are not necessarily affordable. One major reason (though not the only one): “When more people wanted to go, it got more expensive because states weren’t willing to put in enough money for everyone to do so,” said Sandy Baum, a higher education economist and nonresident senior fellow at the Urban Institute.

Private colleges came first in the United States in the 17th century, and they had to invent and refine financial aid as they grew. Some bestowed their largess on a small number of low-income students who could not afford to pay anything, while many others used tuition dollars from wealthy students to cross-subsidize those with lower incomes.

That helped, but not enough. An elaborate menu of federal assistance evolved, including loans for both parents and students; money for campus jobs; and outright grants for low-income and other students.

States developed their own loan and grant programs. Each one also created 529 savings plans (often two plans per state) and tax incentives of various sorts to get people to use them.

As tuitions rose, people had trouble making their loan payments. The federal response was all over the map — discharging debt in bankruptcy got harder, while canceling debt through working in public service or if your income stayed low got easier.

Easier on paper, at least. The Education Department hired outside loan servicers to collect debt payments and counsel the confused young adults who were calling by the millions. The servicers gave out a lot of bad advice, like telling people that they had to keep making loan payments during the early pandemic years in order to stay eligible for the Public Service Loan Forgiveness Program.

Outright grants from the federal government — the money that families don’t have to repay — were never particularly generous. That left most schools struggling to gauge applicants’ ability to pay the additional amounts — and guess at their willingness to do so.

To measure the capacity to pay, many of the more expensive schools required that second form, the CSS Profile, which asked for information about things like the equity in a family’s home if they owned one.

Complicated? Sure. Aggravating? Perhaps. But the schools are at least striving for fairness, when, say, figuring out whether that home equity was an asset that a family should tap for college.

“Two families with the same income, one of whom rents and the other owns, are not equally well off,” Ms. Baum said. Schools would then ask for some portion of that home equity each year — or none at all if they could afford to meet a family’s financial need without asking them to tap into it.

As the list prices rose, a smaller number of families with the means to pay that full price (or the capacity to borrow) were willing to do so. Now, all but 35 or so of the schools that reject the highest percentage of applicants — and thus are mostly shielded from the laws of supply and demand — must offer financial incentives to at least some of the affluent admitted students to get them to come.

Schools refer to this as merit aid — presidential scholarships, academic scholarships and the like. You might get none at all, or you might get in excess of $100,000 over four years, but you often don’t know what it will be until after you’ve paid an application fee and waited months for an offer of admission — and a price quote.

“I don’t think colleges are incentivized to make merit aid simpler,” said Mr. Rosenberg, who has worked at three colleges that offer lots of it. “The reason they don’t want to is simply because it sounds icky. ‘We’ll give money to students who don’t need it’ because if they choose to come, it will be beneficial to their bottom line.”

But he hardly blames them, given that without it a school might not land enough students. People like expensive things, so a private university might keep its list price at $70,000 and then discount it by 50 percent on average. If it can get a student to say yes with a $15,000 merit aid offer, that $55,000 is $20,000 better than its $35,000 average.

Nobody needs to know that, though. “What sounds a lot better is: ‘We’re giving merit scholarships to great students,’” said Mr. Rosenberg, the author of “Whatever It Is, I’m Against It: Resistance to Change in Higher Education.”

It’s not just the private colleges that create these problems either. Word of the morass — multistep applications, lots of debt — gets around, and many students who could benefit most from college never bother applying. “Low-income students can basically go to community college for free already,” said Beth Akers, senior fellow at the American Enterprise Institute. “So complexity becomes the barrier.”

Without some kind of federal regulation or new laws, opaque pricing and sharp-elbowed discounting will continue. And yet some existing state legislation foments the bidding for students. The University of Alabama, for example, has proved adept at using merit aid to entice students from out of state at net prices that still work well for the school. Eventually, the Illinois legislature got tired of that and created a new program to keep the smartest teens from taking their talents to Tuscaloosa.

When schools get together to try to bring more order to the pricing proceedings, however, other branches of the federal government may step in to stop it. At one infamous 2013 meeting, a group of private college presidents mused over a voluntary laying down of arms on merit aid so there wouldn’t be so much underbidding. The Department of Justice got wind of it and sent letters to attendees asking them to preserve all documents for an antitrust investigation. Nobody went to jail or anything of the sort for this, but such discussions no longer take place in big rooms with lots of people in them.

Reasonable proposals don’t get a hearing in Congress, or they stall for years in various committees. There is no universal net price calculator, for instance. A proposed law that would let people enter their data once and get results for every school has languished.

Applicants who do get into college often receive so-called award letters — term sheets, really, explaining the prices. Over the years, they’ve included over 100 different terms for unsubsidized federal student loans, with no legislation or regulation that would standardize the communication. “To be comprehensible instead of incomprehensible would be a good thing,” said Catharine Bond Hill, the former president of Vassar College and managing director at Ithaka S+R, a consulting firm.

Any and every attempt to simplify things — and stop scaring people away — is welcome. But to Mr. Rosenberg, the efforts may also be insufficient. After all, complexity is the result of tens of millions of people trying to pay for hundreds of different kinds of degrees from thousands of schools — for- and nonprofit, religious and secular, state and private. Choice is all-American, and there is no call to shrink the menu much.

College could be cheaper though, and that might solve a lot of problems. “If the cost of producing an education keeps going up, you’re chasing a rabbit you’re never going to catch,” Mr. Rosenberg said. “Making it less expensive is the only way it’s going to become more accessible.”

Ron Lieber is the Your Money columnist for The New York Times and the author, most recently, of “The Price You Pay for College.”