Paying For College
Tuition keeps rising: Will new efforts by schools ease the burden?
Right about now, the only thing that many high school seniors are focused on is whether the admissions letters popping up in their mailboxes say yes or no. But the harsh realities of paying for college can quickly supersede the excitement of getting in. And the reality is that the cost of attending a four-year institution skyrocketed some 38 percent between the 1992-1993 and 2002-2003 school years, while the median family income rose just 10 percent. This academic year alone, tuition and fees have jumped an additional 6 percent at private schools and a record 14.1 percent at public institutions, to a mean of $19,710 and $4,694, respectively.
Sticker shock is keeping many lower-income students away from even seemingly affordable state universities and forcing others to drop out as each year brings new, ever higher tuition bills. Meanwhile, middle-class families, who often make too much money to qualify for financial aid but not enough to cover tuition hikes, are wondering whether they should tap into their home equity or even their retirement savings to keep up with the college bills.
With the Higher Education Act, the law governing federal funding of financial aid, due for reauthorization this year, policy-makers have a chance to address the persistent issues of aid and access for all. Changes under consideration include increasing the maximum Pell Grant award, getting rid of origination fees (an upfront tax on borrowers), and improving loan repayment options. In addition, the Bush administration has proposed overhauling how government aid is doled out to universities, with an emphasis on redistributing monies from rich schools to those with more low-income students.
Shortfall. But don't get your hopes up yet, cautions Terry Hartle, senior vice president of the American Council on Education, which represents 1,800 colleges and universities: "The very real bipartisan desire to help is going to run smack into the federal budget deficit. Whether or not the government will find any money at all by the time the next school year starts is very much an open question." Case in point: The House is discussing whether to end student loan consolidation, which allows recent graduates to lock into a fixed interest rate. Students save a lot over the long run, but it can wind up costing the government big bucks.
Still, a growing number of individual institutions are taking steps to ease the financial burden of a college education. Princeton led the way in 2001 by eliminating all need-based loans in favor of grants for those on financial aid. The University of Virginia is set to follow suit in September, with a $16 million initiative that will replace loans with scholarships for poor students and cap total debt from loans at a year's worth of in-state tuition--currently $14,520--for everyone else. At the University of North Carolina-Chapel Hill, undergrads from low-income families who complete 10 to 12 hours a week of work on campus will receive a full-tuition grant. Harvard, meanwhile, will do away with any expected parental contributions from those making less than $40,000 a year and significantly decrease the amount expected from those who earn under $60,000.
Other institutions are hoping to provide families with a more realistic financial picture from the get-go. A group of more than 230 private colleges, the University of Chicago and Emory University among them, has started a prepaid tuition plan that will lock in today's prices a decade or two down the road--a great deal as long as your child can swing acceptance into one of these competitive schools. Individual colleges have also begun instituting fixed-rate tuition plans. For example, George Washington University recently announced that its price will stay at $34,000 a year for students in the class of 2008; the school has also pledged that financial aid packages will remain constant over four to five years.
Pace University in New York launched a similar program last fall. "It's not only the accessibility question but also the idea of a known quantity in a world filled with unknowns," explains James O'Hara, Pace's director of enrollment management. "You don't know where the economy is going to be or what's going to happen with job prospects, but we hope that if we say to people, `This is what school costs, and this is what it is going to cost the whole way through,' then they'll be able to think ahead and plan better."
While such reforms are well intentioned, critics contend that they will not have a huge impact on increasing access to higher education. "The institutions that need the most help are less prestigious state universities, which enroll the largest percentage of low- and middle-income and minority students," says Clara Lovett, president of the American Association for Higher Education, a nonprofit interest group in Washington, D.C. "They have fewer or no options. They don't have private endowments, they're getting less and less financial support from the public sector, particularly state legislatures--and it's only going to get worse." And even if such schools do take steps to ease the financial burden on families--as Illinois did this year, when it passed a guaranteed tuition plan for all of its public institutions--they may need to cut campus programs to make up the difference.
Not surprisingly, more students are basing their higher education decisions on the bottom line. Jessica McHugh, for one, opted to attend Pace in large part because of the fixed tuition. "It's a weight off my shoulders," says the freshman, who now knows that every year she will be able to cover her $10,270-a-semester tuition with a guaranteed financial aid package that includes a grant, several loans, and a work-study job in the admissions office. She adds: "I don't have to worry about how many thousands more dollars I may need to come up with or borrow and spend the rest of my life paying back. I can focus on my studies instead of my bills."
Up, Up, and Away
Colleges and universities have dramatically increased their prices in the past 20 years.
Average tuition and fees (in 2004 dollars)
Four-year private
1984 $5,093
2004 $19,710
Four-year public
1984 $1,148
2004 $4,694
Source: College Board
USN&WR
This story appears in the April 19, 2004 print edition of U.S. News & World Report.