More Students Funding School With Loans As Value of Grants Decline

The Tulsa World

WASHINGTON -- College students are relying more on loans to pay for their education this year at a time when the availability of grants and scholarships has ebbed, the College Board reported this week.

The total cost of higher education continued to climb this year, the College Board said, although at a more moderate pace compared to last year.

The average tuition for in-state students at four-year public institutions rose 10.5 percent this year, compared with a 13 percent rise last year. The average cost of tuition and fees at public institutions is now $5,132.

Private colleges and universities hiked their tuition and fees an average of 6 percent this year, crossing the $20,000 threshold for the first time.

Community colleges saw their average tuition rise almost 9 percent to $2,076, according to the College Board, a not-for-profit educational organization that owns the SAT.

Including room and board, the price of private four-year colleges was $27,516 this year, and $11,354 at public four-year institutions.

Gaston Caperton, president of the College Board, pointed to shrinking endowments, reduced fund-raising and the constant need for colleges to attract faculty and improve facilities as reasons for the trend in higher tuition costs.

In the case of public institutions, reduced funding from state governments also has contributed to the tuition hikes.

Last year, the growth in loans per student was three times that of the growth in grants per students.

In the economic boom years of the late 1990s, grant aid grew more rapidly than loans. That trend has been reversed over the past three years as endowments and fund-raising have shrunk, schools have shifted their focus towards merit-based scholarships, and Congress has not increased the federal Pell Grant benefit to keep pace with inflation.

Sandy Baum, a senior policy analyst at the College Board, said she expects the net cost of going to college -- the price of tuition minus grants and tax breaks -- to rise as more students rely on loans.

Last year, grants and tax breaks amounted to a discount of roughly $3,300 for the average student at a public university and $9,400 at a private university.

The fastest-growing source of higher education financing has been private loans. Borrowing through banks and other private lenders has increased from 5 percent to 11 percent of total education loan volume over the past five years.

Baum said the College Board didn't include home equity or credit card debt in its study. As many as one-fourth of students may be using credit cards to pay for college, but Baum said it is impossible to determine if students are using credit card debt out of convenience or necessity.

Loans from private lenders and state and local governments totaled $11.3 billion last year, a 39 percent increase over the previous year and a 147 percent increase over three years.

Caperton, the former governor of West Virginia, said the "critical problem" of college financing is that aid is not targeted at low-income students.

In an effort to attract high-achieving high-school students, private institutions are awarding more merit-based scholarships that tend to benefit upper-income students.

Forty-five percent of total federal aid is not need-based, and over 40 percent of tax credit dollars and 76 percent of tuition and fee deductions is received by families with income over $50,000.

The cornerstone of federal assistance to low-income students -- the Pell Grant program -- saw the average value of its grants fall by 1 percent last year. Total funding for Pell Grants rose 6 percent last year after adjusting for inflation while the number of grants rose by 7 percent.

President Bush and Sen. John Kerry, D-Mass., clashed over how to interpret the Pell Grant numbers in their final presidential debate last week.

Kerry pointed out that the average benefit has decreased, while Bush trumpeted the increase in overall funding.

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