College Board’s Annual Trends Reports Show Decline in Federal Student Loan Borrowing as Economy Recovers

By Allie Bidwell, Communications Staff

As college tuition and fees continued to inch up slightly, trends in student aid reflect a nation beginning to climb its way out of the Great Recession, according to the College Board’s annual reports on college pricing and student aid.

Students now are borrowing less than in recent years, and federal Pell Grant expenditures – as well as total recipients – have decreased, which could be a signal of a rebounding economy. And while prices are still increasing at a moderate rate, they are still outpacing the Consumer Price Index and household incomes.

Overall, the combined published tuition and fees and room and board rates in the public two-year, public four-year (in-state), public four-year (out-of-state), and private nonprofit four-year institutions increased between 2.2 percent and 3.5 percent between the 2014-15 and 2015-16 years. Published tuition and fees increased at similar rates.

But those price increases are nothing new, said Jennifer Ma, a co-author of the reports. In fact, in the most recent decade, the tuition increases in the private nonprofit four-year and public four-year sectors were lower than the two preceding decades, she added.

The increase in the average public four-year published tuition and fees was also much more dramatic during the recession, increasing by 22 percent in inflation-adjusted dollars between 2008-09 and 2011-12. By comparison, the average published tuition and fees at public four-year institutions increased 8 percent between 2011-12 and 2015-16, according to the College Board.

At the same time, the average amount students take out in federal loans has been decreasing over the last few years, while the average amount of grant aid has increased.

“There’s not some startling piece of information that comes out this year,” said Sandy Baum, a co-author of the reports.

Although some aspects of college pricing and student aid were on a troubling path during the recession, Baum said they’ve adjusted.

“What we hope is people will be able to now think about the problems from a long-term perspective, instead of thinking about something that happened this year as dramatic,” Baum said.

While federal grant aid has been decreasing since 2010-11, institutional grant aid has been increasing. But data from 2011-12 in the College Board’s report shows some grant aid is distributed to students without regard to financial need (see Figure 20 in Trends in Student Aid).

At private nonprofit four-year institutions, for example, dependent students from families making less than $30,000 each year received nearly $8,000 in non-need-based aid meeting their need, and none exceeding their need. But dependent students from the highest income bracket – from families making $155,000 or more each year – received $5,800 exceeding their need. A similar trend can be seen in the public four-year sector.

“On the one hand, a lot of the non-need-based aid that institutions are giving … is actually meeting the need of the recipients. That’s a very different story,” Baum said. “On the other hand, there is a measurable amount of money going to students who don’t have need or that is exceeding their need.”

Aid levels – including grant aid and tax benefits – grew rapidly during the recession, and continue to grow, but at a slower pace, causing net prices to continue to rise moderately.

“In the most recent years, what’s happening is tax benefits are still increasing, but not fast enough to make the net price go down,” Ma said. “Because net prices are lower, the dollar gap is going to be bigger and bigger, even if they went up at the same rate [as sticker prices].”

The average net tuition and fees at public four-year institutions (in-state) was $3,980 in 2015-16, compared with $3,620 in 2013-14. The average net tuition and fees actually decreased between 2007-08 and 2009-10. Net tuition and fees and room and board in the same sector, meanwhile, has continued to increase over the last decade.

But the College Board reports also show that while net prices for college tuition and fees and room and board have been increasing over the last several years, the inflation-adjusted mean family income decreased for the lowest three income quintiles between 2004 and 2014.

Overall, Baum said it’s important to also look at the distribution of outstanding student loan debt when discussing policy changes. Nearly half – 47 percent – of outstanding education debt is held by individuals from the highest income quartile, and most borrowers – 67 percent – owe less than $25,000.

A larger share of debt is also held by students attending for-profit institutions. Nearly half (48 percent) of 2011-12 bachelor’s degree recipients from for-profit schools owed $40,000 or more, compared with 20 percent at private nonprofit four-year institutions, and 12 percent at public four-year institutions.

Whether students with debt graduate is also an important factor. Across all sectors, borrowers who did not graduate are significantly more likely to default on their loans within two years of entering repayment, the report shows.

“If you want to talk about a student loan problem and about who’s struggling, not graduating appears to make a big difference here,” Baum said.


Publication Date: 11/4/2015

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