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Financial Aid

Are You Really Paying More for College?

Kathryn Knight Randolph

November 12, 2010

Are You Really Paying More for College?
For years, the college cost inflation rate has been steadily rising by roughly 7% each year. The 2010-2011 academic year is no exception. According to College Board, who recently released their Trends in College Pricing and Trends in Student Aid, the average cost of tuition and fees at four-year public schools rose 7.9% while the average rate at private colleges and universities increased by 4.5%.

But are students really paying more out of pocket this year? Not necessarily.

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The College Board Trends revealed that while college costs increased for 2010-2011, so did student aid. From 2008-09 to 2009-10, grant aid per student (of those students who qualify for aid) rose 22% while federal loans increased by 9% per student. College Board reports that “because of increases in grant aid and tax benefits, average net tuition and fee prices are lower in 2010-11 than they were five years earlier, after adjusting to inflation.” So what changed? While there are a variety of factors found in the College Board report that are contributing to the increase in student aid, here are a few of the highlights:

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Pell Grants. The maximum Pell Grant amount rose by $619 to $5,350—the largest one-year increase in history. Between 2008-09 and 2009-10, there was a 26% increase in the number of Pell Grant recipients and a 25% increase in the average grant amount. This led to a 58% increase in total Pell Grand spending.
American Recovery and Reinvestment Act of 2009. This Act expanded the Hope tax credit for educational expenses. It also made more Federal Work-Study opportunities available to students, accounting for a 37% one-year increase after a full decade of continual decline.
Elimination of private lender involvement in educational loans. On July 1, 2010, the federal government became the sole source for federal education loans. Still, the high sticker price is the headline that continues to shock students applying to or already in college. You may be wondering why it’s so difficult to determine what students are really paying—here’s why:

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• Student aid only goes to those who qualify. About one-third of all college students are paying the full tuition and fees cost.
• Other expenses like room and board, books and transportation are continuing to rise and often aren’t covered by grant assistance for those who do qualify.
• It’s also important to take the toll of the recession into account. Family incomes have been virtually stagnant while some families have been affected by unemployment and loss of income. College Board continues its report to say that while the increase in grant aid was beneficial this year that may not be the case in the future. The increase in student aid is likely not to continue each year while higher education tuition and fees will. According to Mark Kantrowitz, a well-respected financial aid expert, Pell Grant recipients will not see another increase in the maximum amount and the Hope tax credit scholarship will decrease if Congress does not extend the rate or make it permanent, as President Obama has asked. Essentially, this correlation is only temporary.

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