Tuition Increases Slow Down, but There's More to College Affordability

Matthew Boggs

The news from the College Board's latest survey is "not as bad as it has been in previous years," according to one of the report's authors, but sticker prices still went up. Above, students wait to be helped at the bursar's office at Kennesaw State U., in Georgia.
October 23, 2013

After years of seeing tuition and fees at four-year public colleges rise rapidly, some observers probably believed the pattern of steep price increases was permanent. But the latest rise in average published price for in-state students at four-year public colleges—2.9 percent—is the smallest in three decades, according to a new report from the College Board.

For the 2013-14 academic year, that average sticker price rose to $8,893, up from $8,646 the year before, shows the annual "Trends in College Pricing" report, which, along with its companion, "Trends in Student Aid," was released on Wednesday.

Last year's increase, reported then as 4.8 percent, was the smallest in more than a decade, but it was still higher than the increase in average published tuition and fees at four-year private nonprofit institutions. This year the private colleges' sticker price rose more: by 3.8 percent.

So what is going on? College prices, it turns out, are complicated and cyclical.

"The startling price increases of recent years, coinciding with the Great Recession, paralleled increases in other economic downturns," the report says. "They did not signal a new era of accelerating prices."

Public colleges raised their prices sharply in recent years, not to try to gouge students or go on a big spending spree, but to make up for falling state appropriations.

But the latest segment on the trend line is less steep. "The news is not as bad as it has been in previous years," said Sandy Baum, one of the authors of the reports, in a call with reporters.

But that is not to say that college has become any more affordable. While sticker prices went up less sharply, they still went up.

Average published tuition and fees at private nonprofit four-year colleges for 2013-14 grew to $30,094, up from $28,989 the year before, according to the pricing report. And at two-year public colleges, average published tuition and fees grew to $3,264 from $3,154, an increase of 3.5 percent. The report also tracks room and board charges.

Affordability goes beyond sticker price, which most students don't actually pay. That's why the College Board also tracks net price, which it defines as the average price paid by all full-time students, on aid or not, after subtracting all grant aid and federal tax benefits.

And net prices have jumped in the past few years, partly because the federal government has stopped pouring as much additional money into financial aid as it had during the recession.

This year, average net tuition and fees were estimated at $3,120 for in-state students at public four-year colleges and $12,460 for students at private nonprofit four-year institutions. At public two-year colleges, full-time students had, on average, $1,550 in aid left over after paying tuition and fees—money to help cover their living expenses during college.

There is, of course, a great deal of variation underneath the averages. The prices charged by individual colleges vary, and even on a given campus, different students pay different net prices.

What families can pay is also part of the affordability equation. Persistently high unemployment, falling family income, and rising income inequality suggest that nothing has improved there.

"Really, what makes college the hardest to pay for is when people don't have reliable income and their savings disappear," said Ms. Baum, a research professor at George Washington University's Graduate School of Education and Human Development.

Aid and Debt

As for student aid, with data a year behind, the College Board reports that the federal government spent an estimated $170-billion in 2012-13. That figure has dropped somewhat in each of the past two years, following years of growth. One reason, Ms. Baum said, was a drop in total enrollment.

What matters more, the aid report argues, is how aid plays out on a per-student basis.

Thirty-six percent of undergraduate students received Pell Grants, the main federal support for needy students, in 2012-13, according to the report. The average grant was $3,650. Both figures changed little from the year before.

Students also receive support from their states and institutions, but the priorities of states and institutions can differ from the federal government's.

Some state grant programs are designed to support needy students, while others are merit based. The share of all state grant aid given out at least partly based on need rose to 74 percent in 2011-12, up from 71 percent the year before. Driving that shift were Florida's and Georgia's cutbacks in merit-based programs, as well as several states' increased spending on need-based programs.

The share of institutional aid that helped meet students' financial need (whether awarded based on need or not) at public four-year colleges grew to an estimated 51 percent in 2012-13, up from 48 percent the year before, according to the report. At private nonprofit four-year colleges, an estimated 72 percent of aid went to meet need, the same share as the year before.

It's unlikely that many people think of federal tax benefits as financial aid, but they remain a politically popular way for the government to make college more affordable. In 2011 the government provided students and their families with $20-billion in savings through education tax credits and tuition deductions. That amount is equivalent to nearly 60 percent of spending on Pell Grants, according to the report.

Students' indebtedness did not change much in one year, the report shows. About 60 percent of students who earned a bachelor's degree at the public or private nonprofit college where they began their studies graduated with debt in 2011-12. Their average load: $26,500. Both the percentage of students graduating with debt and the average amount they borrowed were similar to the year before.

Despite lots of discussion about getting more borrowers into income-based repayment plans, enrollment in those plans remains low, according to the report. In 2013 only 11 percent of borrowers with federal direct loans who were enrolled in a repayment plan were in an income-based one.

Various sources and forms of aid can be essential to students as they piece together a way to pay whatever sticker price they face. That diversity also makes assessing affordability a tricky exercise.