Colleges Gave Record Amounts Of Aid, Raised Tuitions Slightly

Tuition costs rose slightly faster than the Consumer Price Index last year, and students received record amounts of financial aid, according to the annual reports on college pricing and student aid released Wednesday by the College Board.

But while financial aid is growing, average student borrowing is still going up, as well.

Moreover, many education experts said that the report’s findings of relatively stable college affordability, based on data gathered before the current economic downturn, might already be outdated. With the troubles in the stock market, they said, both public and private colleges may soon be in serious financial straits, forcing large increases in tuition.

“Given the economic strain on state budgets, the pressure on state governments to shift the cost of education to students and families may prove irresistible,” said Molly Corbett Broad, president of the American Council on Education, which represents 1,600 colleges and universities. “Private institutions, too, given the loss of endowment income and expected cutbacks in private giving, will likely be forced to increase tuition at the same time they struggle to increase institutional financial aid.”

For the current school year, the reports found, the average in-state tuition and fees at public four-year institutions increased by 6.4 percent — to $6,585 — not much more than the 5.6 percent rise in the Consumer Price Index. At two-year public colleges, average tuition and fees rose 4.7 percent, less than inflation, to $2,402. Private four-year colleges and universities’ average tuition and fees are $25,143, 5.9 percent higher than last year.

“College prices are doing what other prices are doing,” said Sandy Baum, a senior policy analyst for the College Board and a Skidmore College economics professor. “They’re not going up more rapidly; they’re just keeping pace. But then, we had an unusually high rate of inflation. And with the current economic crunch, we don’t know what will happen next year.”

Already, state cuts to university budgets have led to announcements of tuition increases in more than a dozen states, including some that will take effect in the spring semester.

But as the costs of college rise, so does student aid. Last year, the reports said, graduate and undergraduate students received more than $143 billion in financial aid, including grants, federal loans, federal work-study assistance and federal tax credits. In addition, they borrowed $19 billion from state and private sources.

Undergraduates received an average of $8,896 in financial aid, including $4,656 in grant aid and $3,650 in federal loans, an increase of about 5.5 percent over the previous year, adjusted for inflation, according to the report.

After holding steady at 5.2 million for two years, the number of Pell Grant recipients rose to 5.4 million last year.

“The Pell Grant scholarship, which Congress has significantly boosted in the past two years, is playing an increasingly important role in expanding college access, especially for low- and middle-income families,” said Representative George Miller, Democrat of California and chairman of the House Education and Labor Committee.

While the tuition report, “Trends in College Pricing,” covers this academic year’s costs of college, “Trends in Student Aid” is based on the previous academic year’s data.

Private loan volume declined slightly that year, but still represented almost a quarter of the total loan volume.

“In ’07-08, the full effect of the credit crunch wasn’t evident, but it was starting — credit was getting tighter,” Ms. Baum said. “We all expect that private loans will be down next year. More families are understanding that it makes sense to get all the government loans they can.”

For most families, net tuition — the discounted amount most students actually pay — is more important than a college’s published tuition.

At private four-year institutions, the average net tuition, after grants and tax benefits are subtracted, is about $14,900, some $10,200 less than the published price — and that net price has been growing more slowly than the published price.

At public four-year colleges, where the net price has been increasing faster than the sticker price, the net tuition is about $2,900, or $3,700 less than the published tuition.

And at public two-year colleges, the net price has steadily declined, and now is only about $100, or $2,300 less than the published tuition. Because of their higher prices, private colleges, especially second-tier institutions without large endowments, may have big problems next year.

“Private colleges face a real quandary,” Ms. Baum said. “Everybody’s going to have more people applying for financial aid, and it could really be that they’re going to lose enrollment if they can’t meet the need.”

Since the markets went into free fall last month, private colleges have been working to persuade worried families that their institutions may still be affordable.

“In these tough economic times, Job 1 of every private college and university will be keeping their student aid budgets in line with growing financial need, and working creatively to keep student out-of-pocket costs as low as possible,” David L. Warren, president of the National Association of Independent Colleges and Universities, said Wednesday in a statement. “Eighty-one percent of full-time, dependent students at private colleges receive institutional grant aid, averaging $10,011.”

With worsening economic conditions, public and private institutions alike may cut back the “merit aid” offered to attract particular students — often, those whose grades and test scores will improve their rankings — and use that money on aid to needier students instead.

According to the report, public four-year institutions give only 44 percent of their aid dollars to students with financial need. On average, 38 percent of the public universities’ aid goes to non-need-based merit aid, and 18 percent to athletic scholarships.

“There’s a real public policy question there,” Ms. Baum said.