Growing Financial Aid Keeps Net Tuition Price Down
Despite enrollment and tuition increases, the net cost of tuition and fees has only increased slightly as federal financial aid continues to grow to meet the demand, according to a College Board report released yesterday.
“Between 2005-06 and 2010-11, federal grant aid to undergraduate and graduate students combined increased by 141 percent after adjusting for inflation, and savings to taxpayers through federal tax credits and deductions for education increased by 108 percent,” according to the latest Trends in Higher Education report.
At the same time, the average published tuition and fees at public four-year colleges and universities increased at an annual rate of growth of 5.1 percent beyond inflation, or by $1,800 in 2011 dollars. The average net tuition and fees in-state students pay, after considering grant aid and tax benefits, increased at an annual rate of growth of 1.4 percent beyond inflation, or by $170 in 2011 dollars.
Though student loans comprise the largest percentage (46 percent) of all sources of financial aid for postsecondary students, the new report shows increases in the Federal Pell Grant program and Education Tax Benefits particularly slowed the increase in net cost.
The average Pell Grant award increased to $3,828 in 2010-11, from $2,945 (in 2010 dollars) in 2008-09. The total number of undergraduate students in the U.S. increased from 19 million in 2000-01 to 26 million in 2010-11, and the percentage of students receiving Pell grants increased from 20 percent in 2000-01 to 35 percent in 2010-11.
Aid from Education Tax Benefits, while constant from 2009-10 to 2010-11, increased from the $6 billion in 2007-08 to $14 billion in 2010-11, with a growing portion of those funds going to the lower- and upper-income levels, due in part to expanded eligibility requirements in the American Opportunity Tax Credit (AOTC).
“Because of the increase in the income limits for education tax credits, the percentage of total tax savings from education credits and deductions going to filers with incomes of $100,000 or higher increased from 18 percent in 2008 to 26 percent in 2009,” the report states.
Introduced in 2009, the AOTC provided a refund of up to 40 percent of the credit, if the filer did not owe taxes. Because the AOTC is partially refundable, the percentage of total education tax savings for filers with an AGI below $25,000 increased from 5 percent in 2008 to 17 percent in 2009.
Institutional aid increased by $7 billion over just the last two years, from $31 billion in 2008-09 to $38 billion in 2010-11.
“This may be either because of institutional policies focusing on need-based aid or because a combination of rising prices and deteriorating economic conditions have created additional financial need,” the report states.
State Spending
While federal and institutional financial aid is increasing to meet the growing need, state appropriations are not keeping pace with enrollment numbers.
“State appropriations per full-time equivalent (FTE) student declined by 9 percent in inflation-adjusted dollars between 2007-08 and 2008-09, by 6 percent in 2009-10, and by 4 percent in 2010-11,” the report states. “Average tuition and fees at public four-year colleges rose by 9 percent beyond inflation in 2009-10 and by 7 percent in 2010-11.”
The report also found a great deal of variation among states. California, for example, saw a 20.5 percent increase in average in-state public four-year tuition and fees, while South Carolina saw a 2.4 percent increase.
While average public four-year in-state published tuition and fees was $8,244 for the United States, it was more than $13,000 in Vermont and New Hampshire and less than $5,000 in Wyoming and Puerto Rico. Between 2009-10 and 2010-11, total appropriations increased by more than 1 percent in 12 states, declined by more than 1 percent in 28 states, and changed by less than 1 percent in 10 states.
Enrollment numbers also varies widely across states. From fall 2000 to fall 2008, total (FTE) enrollment in public institutions in the United States increased by 22 percent. Enrollment growth ranged from 5 percent in Louisiana and 10 percent in Tennessee and Illinois, to 43 percent in Georgia and 46 percent in Nevada.
Student Loan Facts
- Average debt is $22,000 for public four-year bachelor’s degree earners. About 56 percent of students who earned bachelor's degrees in 2009-10 from the public four-year colleges at which they began their studies graduated with debt. Average debt per borrower was $22,000, up from $19,800 (in 2010 dollars) a decade earlier.
- The proportion of non-federal loan borrowing has declined. In 2010-11, nonfederal loans, which usually have less favorable repayment terms than federal loans, constituted only about 7 percent of education borrowing. From 2005-06 through 2007-08, nonfederal loans accounted for about a 25 percent of education borrowing.
- Bachelor’s degree completers overall somewhat more likely to have no debt at all. Bachelor's degree completers are more likely than those who did not graduate to have accumulated large amounts of student debt, but overall they are also somewhat more likely to have no debt at all.
- Average debt per public college bachelor’s degree earner only increase slightly over past decade. From 1999-2000 to 2009-10, average debt per borrower among public college bachelor's degree recipients increased at an average annual rate of 1.1 percent beyond inflation. The percentage of nontransfer graduates with debt increased from 54 percent to 56 percent.
- Low-income dependent students borrow slightly more than middle-income counterparts. Among dependent students graduating from public and private nonprofit four-year institutions in 2007-08, those from low-income families borrowed only slightly more than those from middle-income families.
- Borrowing through the unsubsidized Stafford and PLUS Loan programs increased sharply over the decade. In 2010-11, 34 percent of undergraduates took out federal Stafford Loans, up from 22 percent in 2000-01. In 2010-11, the parents of about 3.4% of undergraduate students took out PLUS Loans, compared to 2.5 percent in 2000-01.