Will the Aid Be There?
More and more families find themselves in trouble. But there may be bright spots ahead
Like many parents today, Dave and Pam McCorry of Mattawan, Mich., have scrimped, saved, and sacrificed to send their oldest son, Andrew, to college. Indeed, the entire family has pitched in: His forward-thinking grandparents used the prepaid Michigan Education Trust program to take care of freshman-year tuition (just over $5,000) at nearby Western Michigan University; Pam, a registered nurse, has picked up extra 8- and 12-hour shifts; she and Dave have maxed out credit cards and taken on a home equity loan; and Andrew himself has worked upwards of 30 hours a week at a local restaurant. Now 21, the junior business and Spanish major splits his credits between Western Michigan and a less costly community college to save money; this year he also took out a $3,500 Stafford loan, the only government aid he's received thus far.
"I grew up in a family where my parents managed to pay for all five of us to go to college, and we're trying to do the same," says Pam. "We don't want our kids to come out of school with huge loans . . . but at the same time we dig ourselves further and further into debt while we're trying to save for retirement, which just isn't happening." Although she and Dave, who works in the test lab at a medical equipment company, make between $75,000 and $100,000 a year, they are anxiously watching what happens with the myriad proposals now before Congress, given that they have three younger children, ages 13 through 17. Right now, for example, lawmakers are debating the president's new budget, counterproposals, and the long-overdue reauthorization of the Higher Education Act, all of which impact financial aid. "We're just hoping there's a turnaround in government help," she muses. "It's already a daily struggle to manage, and we're obviously better off than a lot of folks trying to do the same thing."
These days, it doesn't matter what your assets look like: It's increasingly difficult for almost everyone to afford college, as tuitions climb and federal aid remains more or less stable. Between 2003-04 and 2004-05, the average cost of four-year public schools rose 10.5 percent to $5,132, and it jumped 6 percent at four-year private universities, to $18,950. At Pennsylvania State University, for one, tuition has increased 8 to 9 percent a year since 2001, in large part because of reduced state funding. There's been no hike in government grants and loan limits during this time period, and the result is a decline in the number of students from less affluent families, says Anna Griswold, assistant vice provost for enrollment management and student aid: "A lot of our lower- and middle-income families are really feeling the burden of this thing called college affordability."
Cutbacks. Much of the legislation being debated in Washington recommends only slight increases in federal aid, along with numerous cutbacks. President Bush's budget proposal, for instance, calls for an increase in undergraduate loan limits from $23,000 to $24,875 and a boost to the maximum Pell Grant by $500 over five years--nearly the same amount the average public school tuition has increased in the past year alone. To help pay for these suggested reforms, some lawmakers are trying to cut the Perkins loan program. "What they're proposing is really to take from Peter to pay Paul," says David Mohning, director of Student Financial Aid at Vanderbilt University, where roughly 1,000 students receive $3.5 million in Perkins loans. He points out that such proposals come on the heels of an update to state tax tables, which will leave fewer families eligible for, say, Pell Grants: "Students are going to be forced to find other, less favorable ways to borrow."
That's already happening: A new report from the Department of Education shows that students borrowed an average of $19,300 in 2000, compared with $12,100 some seven years earlier. Nearly half of all undergrads in the top income bracket now take on debt; these numbers continue to skyrocket. Increasingly, much of this money is coming from alternative private student loan programs instead of the government, which means variable interest rates that start accruing immediately, as opposed to upon graduation; specific credit requirements or cosigners; and, often, additional fees. "It is a very dramatic shift and a very disturbing one," says Sandy Baum, a professor of economics at Skidmore College and senior policy analyst at the College Board. Also coming: The interest rates on federal loans are expected to rise for the first time in five years this summer. "We are looking at a very messy, uncertain, complicated period over the next three, four, five months," says Terry Hartle, senior vice president of the American Council on Education, which represents 1,800 colleges and universities. No matter what happens, he adds, "the federal budget deficit is an 800-pound gorilla. We're not making decisions based on rational assessment of public policy needs in higher ed--we're making decisions based on what we can afford."
On the plus side, families who play the financial aid game right can maximize their chances. And many schools are helping out even more: Last month, Yale became the latest, dropping parental contributions from those making less than $45,000 and significantly decreasing them for those earning less than $60,000. And, like Princeton, which set the bar by eliminating all need-based loans in favor of grants back in 2001, the University of North Carolina-Chapel Hill and Rice University no longer require low-income students to borrow money. The University of Virginia has gone further by covering tuition with grants and eliminating loans and work study for the same group--essentially offering poor students a full ride--and capping all other need-based loans at approximately one quarter the cost of attendance. "Right now," says Yvonne Hubbard, Virginia's director of student financial services, "we think this is the best way to make up for the socioeconomic diversity that we were losing."
Even with the struggles, families like the McCorrys remain committed to college. "It's worth every sacrifice," says Pam, as she recalls how folks suffered when the local General Motors plant closed a few years back. "We want all of our children to go to college because we think that it will afford them a better job and open a lot more doors, and we'll do whatever it takes to get them there."
This story appears in the April 18, 2005 print edition of U.S. News & World Report.