Tuition and Borrowing Growth Slows

College prices are still climbing, but they’re doing so at a slower pace than they were for the past several years, and the amount of money borrowed for higher education last year fell for the third straight year, according to two reports released today by College Board.

The data in the annual Trends in College Prices and Trends in Student Aid reports don’t mean it’s time to stop worrying about the high price of attending college, but they do show some positive signs, the report's authors say.

Average published tuition and fees for full-time in-state students at public four-year colleges increased 2.9 percent from 2013-14 to 2014-15. The average published tuition at two-year colleges increased 3.3 percent, while tuition at private nonprofit colleges increased 3.7 percent.

The inflation-adjusted increase in prices was smaller between 2004-05 and 2014-15 than over the previous decade.

But while the rate of price increases is slowing, the accumulation is still formidable, as Sandy Baum, one of the report’s authors, points out. For public four-year colleges, the published tuition and fee prices are 3.25 times higher than they were 30 years ago. At public two year-year and private four-year colleges, the prices are 2.5 times higher.

“We’ve been living with these price increases for a long time, and people have been living with this cumulative effect,” said Baum, a professor of higher education at the Graduate School of Education & Human Development at George Washington University.

Published price increases vary by degree type. At public universities, tuition for students earning a bachelor’s degree has increased 10 percent beyond inflation how does this percentage increase "beyond inflation" compare to the numbers in the next paragraph? are these inflation-adjusted dollars? if so, let's use same language in both places. dl -- It's not inflation-adjusted. Both increases beyond inflation, so I added that in graf below - kmm.  in the past five years, compared with 16 percent for master’s programs and 17 percent for doctoral programs in the same period.

The trend for the past five years was different at private nonprofit colleges, where bachelor’s-degree tuition increased the most – 13 percent beyond inflation – and master’s and doctoral programs increased 7 percent and 9 percent, respectively.

As for tuition increases at public institutions, declining state revenues per student are a major factor, according to the report.

Room and board costs are also steadily rising across all sectors. They grew at roughly the same pace as tuition this year, with a 3.2 percent increase at four-year public colleges and a 3.4 percent increase at private four-year colleges.

What Students Pay

Although published tuition prices get a lot of attention, more important to understanding how much college costs is the net tuition price, or what a student actually pays after grants, loans and tax deductions are factored in.

The difference between published tuition ands and the average net price has grown over the past several years because the federal government boosted aid to students between 2008-9 and 2010-11. Net prices for students shot down while tuition prices were rapidly increasing.

In 2014-15, the average published in-state tuition and fees at public four-year colleges is $9,139, about triple the net price of $3,030. (The net price is an estimate, since the report's authors have data for the 2014-15 tuition prices but the latest financial aid statistics are from 2013-14.)

Increases in the average grant aid have kept the net prices at private institutions and two-year colleges from rising. That’s not the case at public four-year institutions, though, where the average net tuition and fee price rose about $1,000 in the past five years.

Student Borrowing and Grant Aid

Total education borrowing dropped by 8 percent in the past year, and per-student borrowing fell by 6 percent. Both reductions are larger than the slight decreases seen in the previous two years.

The fall in total borrowing is partially explained by a dip in enrollment. Record numbers of students went to college during the recession, but enrollment levels dropped by 4 percent between 2010-11 and 2013-14.

Undergraduates received an average of $14,180 in financial aid per full-time equivalent student last year, including $8,080 in grants, $4,840 in federal loans and $1,195 in education tax credits.

Graduate students, on the other hand, received just 4 percent of all federal grant aid and borrowed 34 percent of all federal loans. They received an average $26,200 in aid per full-time equivalent student, including $16,080 in loans and $8,450 in grants.

In the past several years, the percentage of loans making up student aid packages has slowly declined as the percentage of grants has grown.

Federal grant aid rose from 30 percent of all grants in 2007-8 to 45 percent in 2010-11 before falling to 40 percent of the total in 2013-14. The shifts are explained by Pell Grants, which peaked at $38.2 billion in 2010-11. Last year, the total spent was $33.7 billion.

While the total amount of Pell Grant spending has increased, the maximum award covered just 63 percent of average tuition at public four-year colleges in 2014-15, compared to 

79 percent in 2004-5.

Justin Draeger, president of the National Association of Student Financial Aid Administrators, said this year’s reports are good news over all. They’re also a good reminder of why permanent changes, such as cuts to Pell Grants, shouldn’t be made in response to acute budgetary problems.

“What we’ve done this last recession, which is sort of budgetary triage on the backs of students, isn’t good long-term policy, because we will reach a normal after a recession,” he said.

The recent annual declines in borrowing haven’t yet been reflected in the debt levels of college graduates, who still leave school with significantly more debt than did their peers from a decade ago, according to the report.

About 60 percent of students who earned bachelor’s degrees in 2012-13 from public and private nonprofit colleges graduated with debt. The average amount per borrower was $27,300, an increase of 13 percent over the past five years.

The percentage of bachelor’s-degree recipients leaving college with $40,000 or more of student debt is also growing. Only 2 percent of borrowers fell in that category in 2003-4, compared with 18 percent in 2011-12.

And, as Draeger points out, even though the percentage of borrowers using income-based repayment plans has increased, that still hasn’t been enough to translate into a decrease in the number of borrowers in default.

College Prices Vary by Geography

National averages conceal much of the variability in college prices based on where a student lives. For students at public four-year institutions, prices range from a low of $4,646 in Wyoming and $6,138 in Alaska to $14,419 in Vermont and $14,712 in New Hampshire.

Baum said there’s not a perfect correlation between state allocations to higher education and tuition prices, but Alaska and Wyoming had the highest state appropriations per full-time student in the country in 2013-14. Likewise, four of the five states with the largest increases for tuition in the past five years were among the 13 states that cut higher education funding by 18 percent or more during that time.

The geographic gap is similarly large at public two-year institutions, where tuition ranges from $1,429 in California and $1,645 in New Mexico to a high of $6,500 in New Hampshire and $7,320 in Vermont.

Acknowledging that range in prices helps give context to tuition increases in different states, Baum said. California, for example, has seen significant percentage increases (almost 60 percent) in tuition at its public two-year colleges. New Hampshire’s two-year tuition has barely budged over the past five years. But California’s price -- the lowest in the country -- is still nearly $2,000 below the national average of $3,347. 

Over all, the portion of state resources going to support higher education has declined steadily in recent decades. It has dropped from an average of $9.74 per $1,000 in personal income in 1989-90 to $5.45 per $1,000 in personal income in 2013-14.