Slow Growth in Grant Aid Means Families Are Paying More for College

By Allie Bidwell, Communications Staff

Although the growth in tuition and fees has slowed over the years, students and families continue to pay more for college, as net prices creep up due to restricted growth in grant aid. At the same time, inequality in family incomes has increased over the last 30 years, putting college even further out of reach for some students, according to the College Board's annual trends reports on college pricing and student aid.

The two annual reports released today – Trends in College Pricing and Trends in Student Aid – track trends in higher education over time, such as published tuition and fees, room and board prices, net price, average grant aid to students, and student loan borrowing.

This year's reports showed that, as in previous years, the published tuition and fees at institutions in 2017-18 continued to grow at a moderate rate, ranging from a 2.9 percent increase at public two-year colleges to a 3.6 percent increase at private nonprofit four-year institutions. And while the average grant aid and tax benefits for full-time students also increased, it was generally not large enough to cover the increases in tuition and fees, causing net prices to increase. In previous years – between 2007-08 and 2012-13 – the growth in financial aid was large enough to cover all or most of the increases in published tuition and fees.  

"The tuition price increases for 2017-18 tell a small part of the story of how much and with what resources students pay for college. The Trends reports highlight long-term changes, showing how annual price increases have compounded over time," said Sandy Baum, coauthor and fellow in the education policy program at the Urban Institute. "When grant aid was growing rapidly, many students were protected from the price increases, but as the growth in federal and state grant aid has slowed, the average net prices students pay are rising."

Average grant aid to students has continued to inch up. Overall, grant aid per full-time undergraduate student increased by 14 percent, or $1,020 in 2016 dollars, between 2011-12 and 2016-17. But during the previous five years, grant aid had increased by 42 percent. Although grant aid is still slowly increasing, the composition of total grant aid has changed. Between 2011-12 and 2016-17, only institutional aid grew rapidly by 32 percent, up to $58.7 billion from $44.4 billion. During the same time, federal grant aid declined by 15 percent, and state, employer, and other grant aid grew by less than 10 percent. In 2016-17, federal grant aid made up 32 percent of total grant aid to students, while institutional aid made up 47 percent of all aid.

The makeup of all federal grant aid has changed, too. Pell Grants declined from 75 percent of all federal grant aid in 2010-11 to 66 percent in 2016-17, while veterans benefits increased from 21 percent to 32 percent. But the share of students who receive veterans benefits is much smaller than those who receive Pell Grants – in 2016-17, 7.1 million students received Pell Grants, while 793,000 received benefits from the Post-9/11 GI Bill.

All of this is to say that despite the aid students receive from grants and tax benefits, most are still left with several thousand dollars in non-tuition expenses to pay for in other ways.

"The increases in the net prices students pay raise particular concerns for low- and moderate-income students," said Jennifer Ma, coauthor and senior policy research scientist at the College Board. "Even when, as is often the case, these students receive enough grant aid to cover their tuition and fees, they frequently struggle to pay for their living expenses while in college."

Oftentimes, students and parents will turn to loans to make up the difference. But the reports showed that total annual education borrowing continued to decline in 2016-17, for the sixth consecutive year. Overall, total borrowing fell 15 percent between 2010-11 and 2016-17, from $125.6 billion to $106.5 billion. Borrowing per full-time undergraduate student also fell during that time. While borrowing per full-time graduate student is lower in 2016-17 than in 2010-11, it increased slightly from 2014-15.

Borrowers are also making progress paying off their loans. Sixty percent of borrowers with federal loans who completed their programs and entered repayment in 2010-11 and 2011-12 had paid down at least $1 of their principal balance after three years. However, non-completers were far less likely to be making progress in repayment, with just 34 percent paying down at least $1 of their principal balance within three years of entering repayment. Dependent students were also much more likely to be repaying their principal balances than independent students.

Still, income inequality over time has compounded the issue of college affordability. The growth in average income for the wealthiest families has far outpaced the growth in income for those at the lower end of the spectrum. The report on college pricing showed that the average income of families in the top income quintile was 7 percent higher in 2016 than in 2006, after adjusting for inflation, while the average income of those in the lowest income quintile remains lower than the average income for those families in 2006.

"Rising college prices would not necessarily signal increasing financial strains on students and families if incomes were growing at a healthy pace," the report on college pricing said. "But earnings have been slow to recover from the recession. … Stagnant incomes and rising inequality exacerbate the barriers created by rising college prices."


Publication Date: 10/25/2017

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