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College Costs Rise, Undercut Gains in Financial Aid

Tuition and other fees at two-year and four-year institutions rose significantly higher this year compared to the previous academic year, outpacing the slow growth of federal financial aid, according to a recent report released the by College Board.

In its annual report, “Trends in College Pricing 2007,” the College Board revealed that the increases for 2007-2008 were somewhat higher than last year but not as high as previous hikes:

  • At public, four-year institutions, in-state tuition and fees average $6,185, or $381 more than last year for a 6.6 percent increase. The average total charges for the current academic school year, including room, board and tuition, is $13, 589, which represents a 5.9 increase over last year.
  • Out-of-state students pay $682 more in tuition and fees this year at public four-year institutions than last year, bringing the average up to $16,600 for a 5.5 percent increase. Average total charges are $24,000, a 5.4 percent increase from 2006-07.
  • Tuition and fees at a private four-year institution average $23,000, or $1,400 more than last year, a 6.3 percent increase.
  • At public two-year institutions, tuition and fees average $2,300, or 4.2 percent higher than last year.

“The average price of college continues to rise more rapidly than the average prices of other goods and services. However, this is not a new phenomenon, but one that has persisted over the entire 30-year period documented,” says Dr. Sandra Baum, senior policy analyst for the College Board and professor at Skidmore College.

Over the past decade, total charges including room, board, tuition and fees rose at an average 2.6 percent per year after inflation at private four-year institutions, and 3.5 percent at public institutions. The increase in total aid only covered about two-thirds of the increase in tuition and fees at private four-year colleges and almost all of the increase in tuition and fees at public four year institutions, not including room, board or any additional cost of attendance.

Dr. David Ward, president of the American Council on Education, was encouraged by College Board’s report, noting that current costs are markedly lower than in 2003. He said, “Despite some slight variation, today’s report shows that the rate of increase in college tuition has remained relatively stable, for the last five years. Still, it is clear from the data on tuition increases at both public and private four-year institutions that more work needs to be done. We hope that state governments — which really set tuition prices at most public colleges and universities — will do their part to reinvest in higher education.”

The report comes as Congress is in the early stages of considering a proposal that could require some colleges with large endowments to spend more of their savings to keep tuition down. Colleges call the idea misguided and say it wouldn’t solve the underlying economic issues explaining the price increases.

Dr. Dallas Martin, president of the National Association of Student Financial Aid Administrators, was less optimistic recognizing the constraints of the federal student aid system on low-income students. “College costs continue to increase at a faster rate than increases in financial aid. This trend is especially harmful to America’s lower income families which increasingly rely on alternative or private education loans which carry high interest rates.”

The College Board also released “Trends in Student Aid 2007.” During the 2006-07 academic year, $131 billion in financial aid was distributed to undergraduate and graduate students in the form of grants from all sources, work-study, federal loans and federal tax credits. This aid made a significant deductions for most students in overall college costs.

The average full-time student enrolled in a public four-year institution received $3,600 financial aid. Meanwhile, the average full-time student attending a private college received about $9,300 in aid and the average student enrolled in a public two-year institution nearly $2,000 in aid.

Many students believe that they will have to pay the “published price” for their college experience, says Baum. As a result, low-income students are often detoured from postsecondary endeavors. However, these “published” prices do not take into account aid that lowers the actual price for many students by thousands of dollars.

Students are not paying the “sticker price” for their college education,” College Board officials reported.

For every institution, the average net price (the published price for tuition minus the average grant aid and tax benefits) that students pay is lower than the published price of tuition. Additionally, net tuition and fees required in 2003-04 a lower percentage of income from low-income families with students enrolled full-time at public two-year and four-year colleges than in 1992-93.

Nearly 60 percent of Pell Grant recipients were independent of their parents. Among dependent recipients of Pell Grants, two-thirds came from families with incomes below $30,000. The average Pell Grant per recipient was $2,494.

Two decades ago, the maximum Pell Grant covered about 52 percent of the average published price for tuition, fees and room and board at a public, four-year institution and 21 percent at a private college. Last year, it covered 32 percent of costs to attend a public four-year college and 13 percent at a private.

To make up for the high tuition and financial aid’s lower buying power, students typically borrow as much as allowed from the federal government, but then turn to private student loans. A decade ago, nonfederal loans accounted for about 6 percent of student aid, but last year they were 24 percent.

The rate of growth in private borrowing slowed last year. But that was at least partly because of new rules allowing graduates students to take out PLUS loans from the federal government, reducing their need for private loans. For undergraduates, private borrowing still rose 12 percent to $14.5 billion.

College Board analysis included distribution information about Academic Competitiveness Grants, approved by Congress by for the 2006-07. The Academic Competitiveness Grants go to selected first year-and second-year Pell Grant recipients who completed a high school curriculum deemed rigorous by the U.S. Department of Education. However, only students enrolled in degree programs are eligible. Those enrolled in certificate program do not reap any of the grant’s benefits.

In the first year of the program, 400,000 students received awards averaging $850, but an estimated 250,000 were excluded.

Also awarded for the first time in 2006-07 were SMART Grants, which go to selected third- and fourth-year Pell Grant recipients majoring in physical life or computer science; engineering; mathematics; technology; or a specified foreign language. In the first year of the program, 80,00 students received awards averaging $3,875.

The Associated Press contributed to this report.


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