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Studies: Pace of College Costs on Decline

By: Associated Press
By: Associated Press

The pace of ever-rising college costs has slowed somewhat this year, and students are relying more on private loans rather than grants or other federal sources to finance their education, according to two new studies.

This year, the average tuition for in-state students at public, four-year colleges rose 10.5 percent to $5,132, according to twin studies released Tuesday by the College Board. Last year tuition rose by 13 percent, the first double-digit increase in a decade.

Tuition at two-year public colleges rose 8.7 percent this year to $2,076, and at private colleges rose 6.0 percent to $20,082.

Factoring in room and board, prices at public, four-years rose 7.8 percent to $11,354. Costs at private institutions were up 5.6 percent to $27,516. Of course, most students don't pay the full sticker price — in 2003, the average full-time equivalent student saw those figures shrink by an average $4500 in grants and tax benefits.

In the current year, the net costs of higher education have likely gone up, though the College Board can't yet say for sure because student aid data is a year behind the tuition price data.

The survey also found students are turning increasingly to private loans to pay for school, borrowing $11.3 billion last year from non-federal sources, mostly private lenders. That figure has risen 147 percent in three years — and it doesn't include credit card debt, which as many as one-quarter of college students may be relying on to finance their education.

Loans through banks and other private sources accounted for 16 percent of education loan volume in 2003, compared to just 7 percent in 1998.

"It's fine for students to borrow for college; the earnings premium is high," said Sandy Baum, senior policy analyst with the College Board and an economist at Skidmore College. But a continued trend favoring borrowing over grants would hurt poorer students, who aren't helped as much by tax benefits or by the trend toward merit-based state aid programs.

"For low-income students it's particularly difficult, because they don't have family resources on which to fall back to help them repay their loans," she said.

According to the College Board, which owns the SAT, student aid from the federal government rose 10 percent in real terms in 2003-2004 to more than $81 billion. Funds for Pell Grants, the primary support for low-income students and a topic in the presidential campaign, rose 6 percent, even after adjusting for inflation.

But the number of Pell Grant recipients also rose 7 percent, and the average amount of each grant fell 1 percent in constant dollars.

David Ward, president of the American Council on Education, which represents public and private schools, said political pressure, cost-cutting and improving state budgets have helped moderate tuition increases. But he said a fundamental issue remains: colleges are getting more of their support from students and less of it from taxpayers.

"It's the substitution of tuition for state support that's causing tuition to go up," he said.


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