College Costs Jumped $1,000 in 2009

The total sticker price of a year at a typical university rose by more than $1,000 in 2009, even though living costs, as measured by the consumer price index, fell.

The average asking price for tuition, room, board, books, and all other expenses at public universities jumped by $1,062, or 5.8 percent, to $19,388 for the academic year that has just started. The total student budget for private colleges rose by $1,638, or 4.4 percent, to $39,028, the College Board reported today as a part of its annual analyses of college prices and financial aid trends.

The tuition prices have risen even faster than recent and significant increases in federal grants and education tax breaks, the College Board calculates. That means the net out-of-pocket costs of a year at college rose several hundred dollars in 2009, while families struggled through a recession.

"Families are facing these prices with incomes that are not making any progress at all," Sandy Baum, a College Board analyst, noted. Considering how public colleges and universities, especially, have had their state subsidies slashed over the years, however, Baum said the tuition increases could easily have been worse.

But there was a little less-bad news in the reports, too. Community colleges, which educate about 50 percent of all college students, are still a bargain. Their average tuition is just $2,544 a year, up only $172 from last year. Despite the recession, which has forced reductions in state and private scholarship programs and increases in tuition, the total amount of grants and tax benefits has been rising. Governments, charities, employers, and schools handed out an estimated $71.2 billion worth of scholarships last year, an increase of almost $4 billion over 2007. And the federal government has increased the size and numbers of federal Pell grants and education tax breaks for this academic year. Education benefits for veterans also have been dramatically improved.

As a result, at least half of all students pay much less than the sticker prices because they have grants and tax breaks to defray their costs. Half of all full-time community college students receive some help with their college bills. The College Board figures the typical community college student gets about $3,000 worth of grants and tax breaks a year, which generally covers tuition plus about half of the typical annual $1,122 for books and supplies.

And 58 percent of all full-time students at public universities receive grants, tax breaks, or other discounts. The College Board says that brings the average net cost of a year at a public college down by $5,400, to a total of about $14,000. Unfortunately, that net cost still is up more than $700 from last year. More than three quarters of students at private schools get grants and other aid, averaging $14,400. That brings their out-of-pocket costs down to about $25,400, a total that is up about $1,000 from 2008.

A significant amount of scholarships are now distributed to students with good grades—no matter how wealthy or needy they are—which means middle- and upper-income students often don't have to pay full sticker prices, Baum said. At public universities, the average low-income student pays about $9,400 after grants for tuition, fees, room, and board. Students from working-class families pay a little less than $13,000. Upper-middle-class families pay about $15,500, and those from families in the top 25 percent of income pay a little less than $17,000.One silver lining of the recession and credit crunch: Students and parents have started to fund their college bills with less expensive loans. The total amount of private education loans, which typically have high adjustable rates, fell by half to about $11 billion last year. Meanwhile, the federal loan programs grew by about $15 billion. Baum said the shift to federal loans would reduce financial stresses on families because federal loans have easier repayment options, such as the new income-based loan payments, and forgiveness programs for teachers and other public servants. The interest rates also tend to be lower. Students can get federal loans that charge anywhere from 5 to about 7 percent, depending on their incomes and their lenders' fees. Parents who don't have bad credit can borrow the full cost of their child's education for about 9 percent through the federal PLUS program.