Federal Grants, Tax Breaks Help Reduce Tuition Pain

Millions more Americans are getting federal college grants and tax breaks.

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Recent—and possibly temporary—improvements to  federal financial aid and tax benefits have cut the tuition price most full-time students are actually paying for college this year to levels lower than they’ve been over most of the last decade, the College Board reported today.

Although the average published in-state tuition for full-time students at public universities rose by $470 to an average of $7,610 for the fall of 2010, the typical student ended up paying only $1,540 out of pocket. That's a $400 increase over 2009, but lower than the $2,000-or-so average net price (after controlling for inflation) that students paid annually in the 10 years prior to that, the College Board found.

[Learn the 10 steps to raising $15,000 for college now.] 

The average private college raised its tuition by $840 to $27,290, but the average private college student actually paid $11,320 in tuition after scholarships and tax benefits were subtracted, the College Board estimated. The net price increased $1,050 over the previous year's, but remained far below the average net price of the previous 10 years, which ranged from $12,000 to almost $13,500 (in today's dollars), the College Board found. 

And full-time students at community colleges, where the average sticker price rose just $120 to $2,710 this academic year, typically got enough aid to cover all their tuition and another $670 for books. 

One main reason for the decline in net price: since 2008, the maximum size of the federal Pell Grant has risen by $819 to $5,550. And the number of students who qualify for the federal grant has skyrocketed: 7.7 million Pells were awarded last year, up from 6.2 million in 2008, and 3.8 million in 1999, the College Board reported. In addition, as a part of the stimulus, the government created the $2,500 American Opportunity Tax Credit, which was claimed by about 12 million families last year. 

[Read about bigger, better college grants.] 

The finding that recent college costs have actually eased for millions of families runs counter to the daily drumbeat of headlines about college budget cuts and tuition increases, notes David E. Shulenburger, vice president for academic affairs at the Association of Public and Land-grant Universities, and a former provost of the University of Kansas. Increases in federal aid and the stimulus funding have filled many  financial holes dug by state budget cuts, he says. What's more, "sticker prices are very visible," but many students pay different net prices depending on factors such as their grades, athletic skills or family income. Those hidden, individualized net costs make it hard to tell what is really happening with actual costs, Shulenburger notes. 

[Read more about college budget cuts across the country.]

But many college finance experts say that while millions of students have benefited from increases in college and government aid, millions of other Americans who don't receive aid or tax benefits are struggling with painfully high college sticker costs. And even those who do qualify for aid are likely to face skyrocketing net prices again soon. 

For example, Baum estimated that about a third of the full-time students, or about 3.8 million people, didn't receive scholarships or tax benefits, and so paid sticker prices. Published tuition prices at public universities have been rising 5.6 percent faster than tuition over the last decade. Over the same period, private colleges have been raising their tuition 3 percent faster than inflation, she found. 

The College Board's report didn't analyze the costs faced by part-time students, who make up 39 percent of the nation's 19 million college students. There is typically less aid for part-time students. 

[Check out this Paying for College guide.]

Finally, while all people have to pay basic living costs whether they attend college or not, colleges have been raising dorm and cafeteria prices at least 2 percent faster than inflation annually over the last decade, the College Board found. As a result, the total sticker price of tuition, fees, living on campus, eating at the cafeteria, buying books, and extras like travel at a public university averaged $20,339 this year, up $951 from last year. The sticker price for all the costs of a year at a private college averaged $40,476 this year, up $1,448 from 2009.