Pell Grants Down, Tuition Up

Decline in key program for poor is among worrisome aid trends in annual survey on college costs, which again outpace inflation.
October 25, 2006

Total funding for Pell Grants dropped to $12.7 billion in 2005-6, from $13.6 billion the previous year -- the first decline in six years. The average Pell Grant per recipient dropped as well, to $2,354 from $2,474. Those figures were released Tuesday by the College Board as part of its annual review of college costs and financial aid.

As has been the pattern in recent years, tuition averages are up at rates that exceed the rate of inflation, with four-year institutions imposing larger increases than community colleges. The average increase for community colleges is 4.1 percent for 2006-7, while the averages are 6.3 percent for public four-year institutions and 5.9 percent for private four-year institutions. The percentage increase last year was identical for private institutions and slightly larger in the public sector, where community colleges were up by 5.4 percent a year ago and public four years by 7.1 percent.

One of the themes of those who presented the information Tuesday was that tuition rates should be seen as "sticker price" and that aid programs, loans and tuition discounting make that figure less important by itself. "Price is not the issue" when it comes to whether or not students go to college, said James Moeser, chancellor of the University of North Carolina at Chapel Hill. Rather, he said that the issue is the ability of families, colleges and the state and federal governments to come up with appropriate packages to help students pay for college.

It was in that context that Moeser and others were particularly concerned about the trends the board noted with regard to student aid. Much of the public discussion of Pell Grants and other student aid focuses on the annual battles in Congress over whether to increase the size of the maximum award (currently $4,050) or measures that are seen as favoring one loan program or another. The College Board's analysis focuses on the money that actually goes out to students.

In the case of Pell Grants, the primary reason for the drop was a change in the formula for determining students' eligibility based on assumptions about how much families are spending on state and local taxes. The changes resulted in an assumption -- disputed by many college officials -- that many families were wealthier than they had been considered in the past. As a result, their awards went down.

That wasn't the only financial aid trend that worries aid experts. The College Board data show that the volume of private loans taken by students has been increasing by 27 percent annually since 2000-1, to a total now of $17.3 billion. Private loans are not guaranteed by the government or subsidized. They frequently have higher interest rates and fewer protections for student borrowers. A decade ago, private loans made up only about 4 percent of student loan volume; now that total is 20 percent.

The College Board report noted that these loans can "fill important gaps" for students, especially those with high college costs and limited aid eligibility. But many experts believe that students and colleges are being lured into using private loans that don't help them -- and the tactics of some private lenders in reaching out to colleges have raised eyebrows.

Tuition Numbers

The bottom line on tuition and other college costs, as computed by the College Board, is that higher education is getting more expensive, but that it is difficult to generalize about what students actually pay and the rates of increase. Here are the averages by sector:

Increases in College Costs, 2006-7

Sector Tuition and Fees 1-Year % Increase Room and Board 1-Year % Increase Total Charges 1-Year % Increase
2-Year Public $2,272 +4.1% n/a n/a $2,272 +4.1%
4-Year Public $5,836 +6.3% $6,960 +5.1% $12,796 +5.6%
4-Year Private $22,218 +5.9% $8,149 +5.0% $30,367 +5.7%

The public rates above are for state residents. Out-of-state residents typically pay much more.

On the classic question of why college costs as much as it does, officials offered a variety of reasons, related to rising expenses for faculty salaries, health insurance, energy costs and other factors. Largely, however, they focused on issues of quality -- and said that there are very specific choices colleges make, for good reason, that push college costs up.

Catherine B. Hill, president of Vassar College and an economist who studies higher education, said that there are always efficiencies to be found on the margins, but that personnel costs are the key expense -- and not one that can be changed without an impact. "If you go from a class of 20 to one of 40, or from 40 to 100, it changes the quality," she said.

Vassar is among the more expensive colleges around, but Moeser -- the head of a public flagship from a state with a history of low tuition, echoed her remarks. "I could cut costs instantly," he said, by just deciding to make class sections larger. He said that more than half of classes at Chapel Hill have fewer than 20 students -- creating a level of student attention that is invaluable, and that costs money.

Many education associations released similar statements, talking about how much colleges are doing to serve students and control costs. At the same time (as happens most years), critics of colleges use the College Board data to issue new calls for greater accountability.

Sandy Baum, a senior policy analyst for the College Board and a professor of economics at Skidmore, wrote the reports released by the board Tuesday. She stressed that the average figures mean very little -- both because of the widespread availability of aid and because there is so much variation among colleges. On the former, the College Board data note that "net price" -- tuition and fees minus grant aid and tax credits -- is significantly less than tuition alone. At private four-year institutions, for example, the tuition average is more than $22,000 but the net tuition price is just over $13,000. (Another analysis was also released Tuesday on this topic. The National Center for Education Statistics released a report examining the cost of attendance and the availability of financial aid in 12 states in 2003-4.)

As to variation among the states, the average community college tuition in California is down 10 percent this year, to $725, while the average community college tuition in Kentucky is up 11 percent, to $3,270. The rate of increase in public, four-year tuition is high this year in the District of Columbia (+27%) and Hawaii (+22%),  but up only 1 percent in California, Maryland and New York. (There are gubernatorial and legislative races in all three of those states this year, a political reality that tends to favor lower tuition increases). In private higher education, there are several dozen colleges where tuition exceeds $30,000 and a handful over $35,000. But there are many private colleges with tuition under $10,000.

What They Charge

While the College Board frowns on it, what many people most want to know when the data come out each year is: Who charges the most? Board officials note that the No. 1 college -- Landmark College, a private institution in Vermont -- focuses on students with learning disabilities and prides itself in providing very personalized instruction. The other colleges at the top of the list tend to be well known private institutions, generally with generous aid programs as well.

At least 12 colleges (not all institutions report data to the College Board) are charging tuition and fees in excess of $35,000 this year.

Colleges Charging $35,000+ in Tuition and Fees, 2006-7

Institution Tuition and Fees 1-Year % Increase
Landmark College $39,360 +4%
George Washington U. $37,820 +4%
U. of Richmond $36,550 +5%
Sarah Lawrence College $36,088 +6%
Kenyon College $36,050 +6%
Vassar College $36,030 +7%
Bucknell U. $36,002 +10%
Bennington College $35,250 +6%
Columbia U. $35,166 +6%
Wesleyan U. $35,144 +6%
Trinity College (Conn.) $35,130 +4%
Colgate U. $35,030 +6%

Just below this group in price, there are many other Ivy universities and prominent liberal arts colleges. Within private higher education, however, many other institutions are a fraction of the price. In particular, private colleges with religious traditions or missions -- either historic or more recent -- of serving minority groups or the disadvantaged tend to charge much less. Generally, these are also institutions where endowments are a fraction of what one would find at most of those in the $30,000+ category.

Sampling of 5 Private Colleges Where Tuition and Fees Are Under $20,000, 2006-7

Institution Tuition and Fees 1-Year % Increase
Indiana Wesleyan U. $17,164 +6%
Morehouse College $17,536 +5%
Samford U. $16,000 +9%
Tougaloo College $9,270 +3%
Trinity U. (D.C.) $17,875 +3%

In public higher education, states have widely differing traditions on what they consider acceptable tuition payments by citizens. The following three samplings show groups of flagship universities, regional state universities and community colleges. All figures are for state residents.

Sampling of Tuition and Fees at 5 Flagship State Universities, 2006-7

Institution Tuition and Fees 1-Year % Increase
Arizona State U. $4,690 +6%
University of Connecticut $8,362 +6%
University of Iowa $5,935 +6%
University of Maryland at College Park $7,906 +1%
University of Michigan $9,723 +6%

Sampling of Tuition and Fees at 5 Regional State Universities, 2006-7

Institution Tuition and Fees 1-Year % Increase
California State U. at Long Beach $2,864 +0%
Nicholls State U. $3,470 +2%
Northeastern Illinois U. $6,261 +11%
State U. of New York at Geneseo $5,560 +1%
U. of North Carolina at Greensboro $3,825 +10%

Sampling of Tuition and Fees at 5 Community Colleges, 2006-7

Institution Tuition and Fees 1-Year % Increase
College of San Mateo $716 -11%
Community College of Denver $2,849 +2%
Florida Community College-Jacksonville $1,949 +3%
Rich Mountain Community College $1,440 +12%
Rio Salado College $1,980 +9%

Data for tuition and fees at individual colleges and universities are from the Annual Survey of Colleges of the College Board and Data Base, 2006-7. Copyright © 2006. The College Board.


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