Inflation Outpaces Most Tuition Hikes

The annual College Board report shows good news for this school year, but next year could be rough.

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The average tuition prices paid by most college students fell--after subtracting out inflation--this year, the College Board reported today. Unfortunately, many university officials have warned that the current financial troubles will most likely reignite tuition inflation next year.

Still, there was at least a glimmer of good news for students. In the academic year starting in the fall of 2008, for the first time in six years, most college prices rose by less than inflation. Even better: After subtracting out the typical amount of scholarships and tax breaks, the average community college student paid only $101 for a year's worth of classes, down from $122 last year. Those who got no aid at all paid an average of $2,404 a year, up 4.7 percent from 2007, which was less than the 5.6 percent increase in the consumer price index. Since almost half of the approximately 21.6 million Americans who take at least one college class a year attend community college, that means nearly 10 million Americans are still getting education bargains, notes Sandy Baum, the Skidmore economist who writes the definitive annual survey of college finances. Those tuition costs don't include other expenses, of course; the College Board estimates community college students spend an additional $2,400 a year on textbooks and transportation.

Although the $2,000 increase in the typical sticker price of private colleges sounds like a lot, it raised the total cost of attendance to $37,390, right in line with inflation. In addition, because about three quarters of the 2.8 million private school undergraduates have scholarships or tax breaks, the average student paid only $27,172 this year, up just 4.7 percent from last year.

A few private colleges have proposed to rein in their prices next year. Benedictine University in Lisle, Ill., for example, has already announced a tuition freeze. But most private colleges have such small endowments that they will need to raise tuition to cover their operating expenses next year.

The most distressing price news is coming from public four-year universities, where the average in-state student paid about $14,600 this year, up about $800 from last year. A decline in tax receipts is forcing a growing number of those colleges to raise their prices. Rhode Island has already announced a midyear tuition increase. Arizona State University just announced sweeping layoffs.

And this is only the beginning, predicts Jane Wellman, executive director of the Delta Project on Postsecondary Education Costs, Productivity, and Accountability. "State revenues and donations are going into the tank. Endowment investment returns are going into the tank," she notes. Schools "are going to have to raise tuition, cut the hell out of the budget, or both." Unfortunately, families' growing inability to borrow against their homes, or raise cash in a difficult economy, means an increasing number won't be able to pay higher tuition. "It really is the perfect storm," she says.

The best hope, she says, is that the financial pressures will force more schools to finally get serious about making fundamental reforms that result in lower costs.