Tuition Is Up -- As Is Uncertainty

Increases for current academic year slightly outpaced inflation for four-year institutions, and lagged inflation for 2-year colleges and for-profits.
October 30, 2008

Both tuition and financial aid are up for the current academic year -- even as the economic uncertainty leaves many colleges and students with worries about next year’s charges.

The average tuition for a private four-year college topped $25,000 for the first time in 2008-9, hitting $25,143, or 5.9 percent more than last year’s total, according to the latest annual report by the College Board, released on Wednesday. At public, four-year colleges, tuition rates for in-state residents were up 6.4 percent, reaching $6,585. College Board officials noted that with inflation for the year running at 5.6 percent, these increases were only modestly above the inflation rate. In some recent years, when the tuition increase averages have further exceeded the inflation rate, politicians and others have questioned why costs were going up so rapidly.

Sandy Baum, a senior policy analyst for the College Board, said that “in nominal terms,” the increases aren’t that different from what they have been in recent years. But there may be a difference in the public perception because “the inflation rate turned out to be so high this year,” she said. At the same time, she acknowledged, while this may lessen Congressional or other criticism, it may provide little comfort to families. “This doesn’t mean it’s easier for families to pay, because all of their other prices went up, too,” she said.

For some sectors, tuition rates this year went up by less than the rate of inflation.

The average tuition for out-of-state students at public four-year colleges this year is $17,452, up 5.2 percent. Community colleges’ average tuition reached $2,402, up 4.7 percent. And in for-profit higher education, the average is now $13,046, up by the smallest percentage of any sector -- 4.5 percent.

Students who live in campus housing are paying about $8,000 a year for room and board, or equivalent costs for their own housing and food, the College Board found. Those prices are up around 4 percent, across sectors. These totals for tuition and room and board leave out other expenses faced by students, including textbooks and transportation.

If this year’s figures largely follow the pattern of recent years of being slightly above or below the rate of inflation, next year could be different. While the economy has generally worsened during the last year, the shocks of the credit crunch and the huge losses on Wall Street took place after colleges made the decisions that led to this year’s totals.

Many states are reporting massive deficits and numerous governors and state budget offices have warned that next year’s legislative sessions will be among the most challenging in many years, in terms of balancing budgets. Economic downturns -- even some of lesser magnitude than what the United States may now be experiencing -- have in years past seen states dictate double-digit tuition increases at many public institutions.

While many private colleges are also extremely anxious about the economic downturn, Baum predicted that they may respond in different ways, at least with regard to tuition rates. Private colleges have for years noted -- and the College Board’s data back them up -- that relatively few students pay the full listed price, given the array of aid and loans available from federal, state and institutional sources.

As the economy has soured this fall, however, some reports have suggested that private colleges may be losing students due to lack of funds, and many private college presidents have been saying privately that they fear much more this year than in the past that sticker price could scare off families. Baum said that such logic could result in private colleges finding ways to limit increases next year. “They are going to be intensely aware that people don’t have much money to pay,” she said.

Still, for tuition-dependent institutions -- which many private colleges without large endowments are -- keeping tuition down may make it more difficult to meet increased demand for financial aid. Said Baum: “The tension may be: Are they going to decide they need more money for financial aid or to just hold tuition down?”

Already, some private colleges are announcing their tuition plans for next year earlier than in the past and with smaller increases than in the past. Augustana College, early this month, announced the smallest percentage increase in tuition in 25 years, a decision made much earlier than normal in an attempt to reassure students and their families. Benedictine University announced this month that it would freeze tuition at current levels for all currently enrolled students through spring of 2010, while telling those applying to next year’s freshman class that they will not see a tuition increase until the spring of 2011.

A major theme of the College Board report, year after year, is that the most expensive colleges and universities (the ones that get the most press coverage) are not typical of higher education as a whole, in terms of what students are charged. This year’s report noted that only 19 percent of full-time undergraduates at four-year colleges and universities are enrolled at institutions where the tuition charge is at least $24,000. In contrast, 29 percent attend institutions that charge less than $6,000. (And those figures, for both groups of students, exclude the aid students receive.)

Until this year, the College Board has released data combining four-year colleges and universities in public and private sectors, but not differentiating further. Noting that there are real differences among sectors -- with doctoral institutions more expensive -- the College Board this year released breakdowns in greater detail than in the past. (The figures below for public institutions are in-state residents only.)

Average Public Charges for Undergraduates, by Sector, 2008-9

Sector Tuition and Fees 1-Year % Increase Room and Board 1-Year % Increase Total Charges 1-Year % Increase
Public doctoral $7,307 6.5% $8,170 5.3% $15,477 5.8%
Public master's $5,707 6.2% $7,041 5.0% $12,748 5.5%
Public baccalaureate $5,604 5.8% $7,403 4.8% $13,007 5.3%
Private doctoral $31,066 5.6% $10,494 4.3% $41,560 5.2%
Private master's $22,717 6.2% $8,713 4.9% $31,430 5.8%
Private baccalaureate $23,054 6.0% $8,175 5.1% $31,229 5.7%

The College Board also on Wednesday released an annual report on student aid and loans, finding more aid and loans for the year and a notable decline in private loans.

Among the highlights:

  • In 2007-8, undergraduates received an average of $8,896 in financial aid, including $4,656 in grants and $3,650 in federal loans.
  • The number of Pell Grant recipients increased by 5 percent, to 5.4 million in 2007-8, following two years in which the total held steady at 5.2 million. This data predates reports this year of sharp increases in the number of students applying for federal aid.
  • Private and public institutions continue to provide large sums of institutional financial aid, with its purpose a mix of helping students with financial aid and using merit awards to attract students who may not have financial need. Data for these figures come from 2006-7, when private four-year colleges awarded almost $7,500 per student, 70 percent of that to help meet financial needs. For public four-year colleges, the figure was more than $1,000 per student, with about 44 percent for financial needs.

One of the trends that the College Board has documented -- with some concern -- in recent years has been the rapid increase in private loan volume. These loans are frequently at higher interest rates and are almost always with fewer protections than students receive in federal loan programs -- but many students and families are not aware of the differences.

Between 2006-7 and 2007-8, private loan volume declined slightly, from $19.2 billion to $19.1 billion. This follows a decade in which such loan volume increased by about 23 percent a year.

Baum said it is unclear why the private loan volume started to fall. These figures predate the credit crunch this year that may be affecting some students seeking private loans. But Baum noted that the percentage increases in private loan volume have been so large for so long that it was unlikely that volume could have continued to increase at that rate.


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