Oct. 19, 2005

Aid Is Up, Tuition Up More

Student financial aid is up this year, but not as much as tuition.

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The College Board announced Tuesday that tuition and fees are up for the 2005-6 academic year on average by 7.1 percent at public four-year institutions, 5.4 percent at public two-year institutions, and 5.9 percent at private four-year institutions. For room and board as well, increases are the largest at public, four-year institutions.

The increase at private four-year institutions is the same percentage as the previous year’s increase, while at public institutions, this year’s increase is a few percentage points less than last year’s increase.

Increases in Costs, 2005-6

The bad news is that, while some institutions are covering all student need, on average, aid is not keeping pace with tuition. The average net cost of college per student is up at private four-year colleges – from $11,300 to $11,600 – and at public four-year colleges – from $2,000 to $2,200 for state residents, after adjustment for inflation. Net tuition at public two-year institutions stayed steady, when adjusted for inflation.

The board’s report on aid, which uses statistics through the end of the 2004-5 academic year, showed that average aid per student increased only 3 percent from 2003-4. At the same time, the value of private loans students took out in 2004-5 jumped 30 percent from the previous year. Even with the jump, guaranteed loans, which account for about 82 percent of all student loans, are far more common, but the private loan jump is an indicator of the added pressure felt by many families.

Gaston Caperton, president of the College Board, called the increase in net costs a “disturbing” trend that could jeopardize America’s place in the global market place. “We see students making career choices based on their ability to pay loans,” he said.

The fact that the average net cost of college is up, though, does not mean that all students are paying more. Amy Gutmann, president of the University of Pennsylvania, noted at the College Board’s press conference that Penn has worked hard to keep tuition increases — 5.4 percent this year — to a minimum, while fund raising and doing things like keeping “the thermostat at 85 in the summer,” she said, to ensure that student financial needs are met. She said the average financial aid package at Penn is $29,000 per year.

Need-based aid is “the great equalizer,” she said, adding that the shift by some institutions from need-based to merit-based aid has “widened the enrollment gap” between low-income and middle-income students, as well as between high-income and middle-income students. “The fight for students who will increase [the college’s] SAT scores is a fight to the bottom,” Gutmann said. She added that one major problem is “sticker shock,” when families see the high cost of tuition and turn away without exploring financial aid options.

Some institutions not accustomed to major fundraising have had to put huge tuition increases in place. After a history of plentiful state funding, Wayne State University, in Detroit, watched that money dry up in the past few years. This year, tuition at Wayne State is up 18.5 percent, bringing average tuition and fees to $6,900 for state residents. Last year, the legislature capped the tuition increase at only 2.5 percent. “We literally couldn’t pay our bills,” said Nancy Barrett, the Wayne State provost. In fiscal 2004, Wayne State had to eliminate 200 staff jobs, 75 through layoffs. The university also closed one college and combined two others to save on administrative costs. Even with record enrollment, Wayne State had to increase tuition. “We have deferred maintenance,” Barrett said, “and students waiting two weeks for advisors, so we decided to bite the bullet.” Even though Wayne State increased the amount of money for financial aid by an even larger percentage than tuition, Barrett is worried that the tuition hike will decrease access at Wayne State, which has long served a low-income, urbanpopulation.

Still, even among public four-year institutions, some colleges were able to keep tuition increases relatively low. Auburn University raised tuition 4 percent. “We had a good year in the legislature,” said David Granger, a spokesman for Auburn. Granger said Auburn joined forces with the University of Alabama system and hired a lobbying firm to “increase our presence in the legislature.” Apparently, he noted, the firm was a good investment.

Several of the speakers at the College Board’s press conference railed against programs that give money solely based on a student’s high school grade point average, not on need. These programs “are very harmful in the long run,” said William Kirwan, chancellor of the University System of Maryland. They often “subsidize education for upper income families,” he said, calling it “something responsible citizens don’t do.”

Sandy Baum, a senior policy analyst at the College Board and an economics professor at Skidmore College, noted that, generally, college is still a good investment, and that most graduates of four-year institutions graduate with less than $20,000 in debt. But Ronald Williams, president of Prince George’s Community College in Maryland, said that, as debt has become inevitable, more students at his institution have decided “’I can’t go [to college] and not work,’” he said. Seventy percent of his students are now part-timers.

Robert Shireman, director of the Project on Student Debt , an organization that looks for cost-effective ways to for families to finance higher education, said that the ills of student debt are being compounded by the fact that more loans are private, and thus have higher interest rates. “I would be very reluctant to encourage private loans for someone who does not have some backstop,” he said.

One fear typically expressed by educators when the tuition data are released each year is that headlines about the most expensive colleges will obscure the reality that most students attend colleges that aren’t that expensive. The following table shows where most students enroll, by cost.

Distribution of Full-Time Undergraduates at 4-Year Institutions, by Cost of Tuition and Fees, 2005-6

— David Epstein

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