Student Aid Is Up, but the Rise in College Costs Outpaces Family Incomes
By BECKIE SUPIANO
The Chronicle of Higher Education
November 7, 2008
College prices rose only slightly faster than inflation for the 2008-9 academic year, but that may say more about the American economy's steeper prices for everything than it does about college costs. Tuition and fees rose between 4.5 percent and 6.5 percent for various types of institutions, similar to previous years, but a 5.6-percent increase in the Consumer Price Index means that tuition growth was less than 1 percent in constant dollars.
Meanwhile, more student aid is available than ever before. The volume of private loans, however, had declined even before the onset of the credit crunch, according to two reports released last week by the College Board.
In 2007-8, the most recent year for which student-aid data are available, both total grant aid per student and total federal loans per student grew about 5.5 percent after inflation. Undergraduates received an average of $8,896 in financial aid, including $4,656 in grants and $3,650 in federal loans.
But even though grants are rising, they do not make up the difference between growing college costs and family incomes, said Sandy Baum, a senior policy analyst at the College Board and one of the authors of the reports, "Trends in College Pricing 2008" and "Trends in Student Aid 2008."
After two years of holding steady at 5.2 million, the number of Pell Grant recipients grew to 5.4 million in 2007-8.
The volume of private loans shrank by $173-million, or about 1 percent, to $19.1-billion in 2007-8. That decline reverses years of double-digit growth and does not reflect the recent credit crunch. At the same time, the volume of federal loans rose by 6 percent after inflation.
The decline in private-loan volume is probably the result of increased borrowing in the federal system, said Mark Kantrowitz, publisher of the Web site FinAid, which offers student-aid information. A 2006 change allowed students to take out more federal loans in their first two years of college.
Next year's student-aid report will reflect the impact of tightened criteria for private borrowing, as well as newly increased aggregate limits for federal loans. "We may actually see a significant decline in private-loan volume," Mr. Kantrowitz said.
According to the College Board's Annual Survey of Colleges, about 60 percent of graduates have debt from their undergraduate studies. For those students, the average total debt is $22,700.
While student debt is a concern, it can overshadow the reality that not all students borrow to pay for college, Ms. Baum said. "It's not like everybody is taking a loan."
Trends in Pricing
The average cost of college kept pace with inflation for the 2008-9 year. Increases in tuition and fees typically outpace inflation, but the Consumer Price Index rose more than usual this year. That demonstrates the complications of looking at tuition relative to inflation, Ms. Baum said.
In-state tuition and fees at public four-year institutions increased 6.4 percent from the 2007-8 year, the survey found, along with a 5.2-percent increase for out-of-state students. In dollar amounts, in-state tuition and fees rose by $394, to $6,585, while out-of-state tuition and fees grew by $866, to $17,452.
Private four-year institutions saw a tuition increase of 5.9 percent, with the average cost of tuition and fees at $25,143, up $1,398. Public two-year institutions saw an increase of 4.7 percent in tuition and fees, averaging $2,402, which is $108 more than last year.
For-profit institutions saw a 4.5 increase in tuition and fees, which grew $557, to $13,046.
The Consumer Price Index rose by 5.6 percent from July 2007 to July 2008, meaning that tuition and fees at public two-year colleges, for-profit institutions, and for out-of-state students at public four-year institutions declined in constant dollars. Tuition and fees at private four-year colleges grew 0.3 percent after inflation. At public four-year colleges they grew 0.7 percent for in-state students.
College prices vary by region. Among four-year public institutions, in-state tuition and fees are lowest in the South and highest in New England. Over all, the costliest colleges are private four-year institutions in New England, and the lowest are public two-year colleges in the West. Twenty-nine percent of full-time undergraduates at four-year institutions attend colleges with listed prices below $6,000, while 19 percent attend colleges priced at $24,000 or more.
The price of a college education has attracted Congressional attention, the report notes. This year's reauthorization of the Higher Education Act requires the Department of Education to begin, in 2011, publicizing the 5 percent of institutions with the highest tuition and fees, highest average net prices, and largest percentage increase in tuition and fees over three years. Those institutions will have to provide an explanation of why they raised prices and whether they will continue to do so. The department will also provide a list of the lowest-priced institutions and state-by-state information.
The report "Trends in College Pricing" tracks changes over a 30-year period. From 1977-78 to 2007-8, tuition and fees grew by an average of $1,300 in inflation-adjusted dollars at public two-year colleges, by about $4,000 at public four-year institutions, and by $15,000 at private four-year colleges. Over the same period, average family income rose by only $463 for the poorest 20 percent of families, $11,275 for the middle 20 percent, and $146,650 for the wealthiest 5 percent.
The two reports are available on the College Board's Web site.
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