The list-price tuition at U.S. colleges and universities has risen by roughly 7% per year since the early 1980s. The inflation rate has averaged just 3.2%. These are some of the numbers that fuel public anxiety about how to pay for higher education.

The story of rising tuition is complex. Unfortunately, much of the public discussion about the cost of attendance is too simplistic. To understand the reasons for rising tuition, and the effect that this has on families, we need to break down the forces that affect how tuition is set and that determine who pays the bill.