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STUDENT CHARGES AND FINANCIAL AID |
Summary
• State budgets have continued to improve for the second consecutive year, offering relief for student charges
and financial aid. Rising enrollments, employee compensation and benefits and infrastructure upgrades, however, are continuing to cause concern and
strain budgets.
• Increases in resident tuition and fees slowed in 2005-06, averaging 7.1 percent, compared to double-digit increases in the previous
two years.
• Eleven states showed tuition increases above 10 percent, comparing favorably to 17 states last year and 30 states the year before that.
• Room and board charges at public four-year institutions increased 6.2 percent in 2005-06. Increases in room and board have been relatively
consistent for more than a decade.
• Total financial aid to postsecondary students increased 10 percent in 2004-05, representing a six percent growth in grant aid and a
12 percent increase in loan dollars.
• Though total Pell Grant expenditures grew 3 percent in current dollars from 2003-04 to 2004-05, the average grant per student fell 3
percent in inflation-adjusted dollars in 2004-05. |
Overview
For the second consecutive year, the economy and state fiscal conditions continued to improve, offering some relief for student charges and financial
aid at public colleges and universities in 2005-2006. Tuition increases have shrunk to single-digits, but concern is still high regarding enrollment
growth, employee compensation and benefits, and infrastructure upgrades. At the state and federal levels, student aid funding is an area of concern
as the number of eligible students continues to rise and the gap between tuition prices and available aid widens.
Looking ahead, policymakers will again focus on tuition levels and the tuition-setting process, especially as it pertains to access and college affordability
for low-income students. Reauthorization of the federal Higher Education Act (HEA), entering its fourth year, is likely to result in additional tuition-related
reporting requirements for institutions.
Aid issues also will continue to present challenges for students and their families. Higher interest rates and modified repayment benefits in the
federal student loan programs will place significant pressure on borrowers, compounded by cuts in grant programs. At the state level, lawmakers will
debate aid priorities (such as need-based vs. merit-based) as they cast a wary eye at health care, K-12 education, and other competitors for resources.
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Findings
Undergraduate tuition and fees
Resident tuition and fees
Tuition and fees for resident undergraduate students at public four-year institutions averaged $5,491 for 2005-06, an increase of $365 (7.1 percent)
over 2004-05. [Table 1] Though greater than the rate of inflation, such an increase is notably smaller than
the double-digit tuition increases of the past two years—10.5 percent from 2003-04 to 2004-05, and 13.9 percent from 2002-03 to 2003-04.
AASCU member institutions fared better than the overall average, posting average resident tuition and fees of $4,918, an increase of $315 (6.8 percent)
over the previous year. Tuition at NASULGC member institutions averaged $6,052 in 2005-06, representing an increase of $424 (7.5 percent) from the
previous year. [Table 1]
For 2005-06, 11 states reported tuition increases above 10 percent, comparing favorably to 17 states in 2004-05 and 30 states in 2003-04. In the majority
of states (29), tuition increased more moderately—greater than the 4.7 percent rate of inflation (as measured by changes in the Consumer Price
Index between September 2004 and September 2005), but less than 10 percent. State averages ranged from an increase of 17.2 percent in Colorado to
a decrease of 19.2 percent in New Mexico. [Table 2]
Forty-three percent of students at public four-year institutions attend schools that charged less than $5,000 in tuition and fees in 2005-06. [Table
3] Over half (54 percent) of students at AASCU institutions and about one-third (35 percent) of students at NASULGC institutions were enrolled at
campuses that charged less than $5,000. [Tables 4 and 5]
Non-resident tuition and fees
Non-resident undergraduate tuition and fees at public four-year institutions averaged $13,164 for 2005-06, an increase of $741 (6.0 percent) over
2004-05. At AASCU institutions, non-resident tuition rose 5.8 percent, and at NASULGC institutions, tuition for non-residents increased 6.3 percent.
[Table 1]
Long-term trends
The College Board notes that relatively large increases in tuition and fees occurred early in the 1980s, again in the early 1990s, and once again
in the early 2000s, with the largest increases occurring in the most recent cycle. Figure 1 depicts the one-year
increases in tuition and fees for more than a decade, illustrating that the biggest jump occurred from 2002-03 to 2003-04.
Room and board
Room and board charges at public four-year institutions averaged $6,636 in 2005-06, an increase of $386 (6.2 percent) over 2004-05. [Table
1] Figure 1 illustrates that increases in room and board have been relatively consistent over the past decade.
Financial aid
Total financial aid to postsecondary students grew to $142.7 billion in 2004-05, an increase of 10 percent over 2003-04. Grant aid grew by 6 percent,
while loan volume increased 12 percent. In 2004-05, grants constituted 40.0 percent of total student aid overall, down from 49.3 percent in 1990-91.
Loans constituted 53.6 percent of total aid in 2004-05, up from 48.1 percent in 1990-91. [Figure 2] For undergraduate
students only, grants and loans each represent 46 percent of total aid, with the remainder going to work-study funds and educational tax benefits.
For graduate students, three quarters of total aid comes from loans, with only 23 percent coming from grant aid.
Pell Grants
Total Pell Grant expenditures grew 3 percent in current dollars from 2003-04 to 2004-05, but there was no increase in constant (inflation-adjusted)
dollars. In fact, the average grant per student fell 3 percent in inflation-adjusted dollars in 2004-05. In that year, the average Pell Grant covered
36 percent of tuition, fees, and room and board at a public four-year institution. |
Policy Trends and Analysis
Student Charges
On Capitol Hill, lawmakers taking up HEA reauthorization are considering different approaches for requiring colleges and universities to provide
more data to the U.S. Department of Education on how much tuition is rising—and why. Under one approach, institutions would be ranked according
to their tuition increases, with the ranking to be widely publicized. The other, more punitive proposal, would employ a “College Affordability
Index,” in which colleges and universities repeatedly exceeding the index would be subject to management reviews and other sanctions.
Improving state finances continued to provide relief for public colleges and universities and their students in 2005-06. According to the Center
for the Study of Education Policy at Illinois State University, state higher education appropriations rose 5.3 percent ($3.6 billion) in Fiscal
Year 2006 (FY06), following last year’s increase of 3.8 percent ($2.3 billion). Increases in funding have helped to slow tuition increases
to single digits for the first time in several years.
At the state level, policy activity related to college and university prices continued in legislatures across the country, even as fiscal conditions
improved. In some states, such as Arizona, Iowa, Maryland, New York, Ohio and South Carolina, efforts to limit tuition increases to the Higher Education
Price Index or the Consumer Price Index are sparking vigorous debate. In Iowa and Kentucky, public institutions created agreements to control tuition
increases in exchange for additional state funds. Many legislatures also are exploring new funding options for higher education. Missouri is considering
a higher education voucher that would allocate state funds to students rather than institutions. In Michigan, the legislature is debating a new
funding formula that would base state funding for the 15 public universities on their enrollment, research activities and the number of degrees
granted. [Figure 3]
Financial Aid
Student loans continue to lead HEA reauthorization debates. In December 2005, Congress passed budget reconciliation legislation that raises interest
rates on both student and parent loans. Additionally, the bill creates new supplemental grant programs for high-achieving, full-time freshman and
sophomore Pell Grant recipients studying physical, life or computer sciences, mathematics, or foreign language. Other key issues in the bill include
raising loan limits for first- and second-year borrowers to $3,500 and $4,500 and reducing loan origination fees over the next five years.
Annual federal appropriations brought disappointing news for student aid programs. For the fourth consecutive year, the maximum Pell Grant will
remain at $4,050, and total program funding will fall. Other programs, such as the Supplemental Educational Opportunity Grant and College Work Study,
also experienced cuts.
While the states awarded $6.9 billion in total state-funded student financial aid in 2003-04, an increase of 9 percent, tuition increases continued
to outpace funding for aid. According to the National Association of State Student Grant and Aid Programs (NASSGAP), funding for need-based aid
increased only 4 percent—a smaller increase than past years as states continued to redistribute aid toward more merit-based programs. Allocation
of this need-based financial aid was uneven, with six states (California, Illinois, New Jersey, New York, Pennsylvania, and Texas) awarding 63 percent
of the total.
With the gap between tuition prices and student financial aid widening, many states are considering proposals to increase tuition aid for low-income
students. Hawaii is debating a plan that would increase aid for students who qualify for free or reduced-priced lunches and graduate with a 3.0
grade point average from a public school in the state, while Utah is considering increasing need-based aid by $1.7 million. Many states also are
rethinking their merit scholarships and pre-paid tuition plans due to financial strain. Nevada and West Virginia are considering more stringent
eligibility criteria for their merit programs, and states such as Kentucky, Ohio, Oklahoma, Texas and Wyoming have either suspended or closed their
pre-paid tuition plans to new enrollment. |
Conclusion
The most recent data on student charges and financial aid reveal optimistic news for public colleges and universities, policymakers, and students.
States are once again experiencing economic growth and more fiscal stability, which in turn has relieved pressure on tuition and fee increases. Some
state legislators are beginning to refocus their efforts and funds on providing financial aid not only based on merit, but also on need. Anxiety still
runs high over sizeable enrollment gains that will further squeeze institutions if state funds do not keep up. Higher education is constantly competing
with rising health care costs and K-12 education for their piece of the budget pie. If colleges and universities get pushed further down the list
of state priorities, tuition rates will again rise, making it even harder for states and their citizens to compete in the global marketplace. |
References
Center for the Study of Education Policy, Illinois State University. Grapevine [data accessed online January 2006].
College Board. Trends in College Pricing 2005. Washington, D.C. 2005.
College Board. Trends in Student Aid 2005. Washington, D.C. 2005.
National Association of State Student Grant and Aid Programs. 35th Annual Survey Report on State-Sponsored Student Financial Aid, 2003-2004
Academic Year. Springfield, Illinois: Illinois Student Assistance Commission, 2005.
National Center for Education Statistics. Digest of Education Statistics 2004. Washington, D.C.: U.S. Department of Education, December 2005.
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