Sandy Baum, senior policy analyst for the College Board and professor of economics at Skidmore College, has submitted comments on the latest reports from the College Board. Here’s what she has to say:

This week the College Board released its annual reports, Trends in College Pricing and Trends in Student Aid, along with a supplement to their 2004 report, Education Pays: The Benefits of Higher Education for Individuals and Society. Together, these reports provide a comprehensive overview of how the published price of a college education has risen over time and the trend in the amount and forms of the financial aid students receive to help them pay the price. Education Pays highlights the returns to individuals and to society as a whole from the public and private investments in higher education, as well as the continuing gaps in participation and success that make an increased focus on making college education accessible and affordable to all eligible students so vital.

Trends in College Pricing emphasizes the variation in the prices of the diverse offerings of the U.S. higher education system. In 2004-05, average published tuition and fee levels are $2,191 in public two-year colleges, $5,491 in public four-year colleges and universities, and $21,235 in the private nonprofit four-year sector. Adding room and board charges yields a published price of $12,127 for public four-year and $29,026 for private four-year institutions. However, even within sectors, prices vary significantly across states, regions of the country, and types of institutions.

The 7.1 percent ($365) increase for public four-year and the 5.4 percent ($112) increase for public two-year institutions are significantly lower than the increases in the past couple of years. This pattern of rapidly rising prices for a short-time when state and local appropriations are declining or growing slowly, followed by a return to more typical prices increases, is repeated each decade. However, the 40 percent increase in public four-year tuition and fee levels between 2000-01 and 2005-06, after adjusting for inflation, is significantly larger than any other five year increase over the past 30 years.

It is impossible to correctly interpret the impact of rising published prices on access and affordability without focusing on net price, the price that students actually pay after considering the subsidies they receive. The $129 billion in student aid distributed during the 2004-05 academic year yielded average aid of $10,100 per full-time equivalent student; $4,900 of this aid is in the form of loans and $4,500 is in the form of grants. The remainder comes through work-study and federal education tax credits and tuition and fee deductions. This aid covers both undergraduate and graduate education. Whereas graduate students receive 76 percent of their aid in the form of loans and only 22 percent in the form of grants, undergraduates receive 46 percent grants, 46 percent loans, and most of the remainder in tax benefits.

Grant aid per student continues to rise, even after adjusting for inflation. But after a brief period when grants actually grew more rapidly than loans, since 2001-02, loans have been outpacing grants. The Pell Grant maximum has stagnated — The maximum Pell Grant, which covered 35 percent of average public four-year tuition, fees, and room and board in 1994-95 and 42 percent in 2001-02, covered only 36 percent in 2004-05. While most of the grant aid offered by states and institutions is based on need, and need-based aid from both of these sources continues to grow, an increasing proportion is based on other criteria and is awarded to students who could afford to enroll even without that aid. The same is true of federal tax benefits.

The overall picture is that, while the published price of college can be a misleading indicator of affordability, the net price of a year of higher education continues to rise as a percentage of income only for students from the lowest-income families. The financial constraints faced by low- and moderate-income families, combined with the unequal educational opportunities available to children, contribute to startling differences in educational attainment. While the gap between the enrollment rates of high- and low-income high-school graduates has narrowed somewhat over recent decades, in 2003, 80 percent of students from families with incomes in the upper 20 percent of the income distribution enrolled in college immediately after high school, compared to 49 percent of those in the lowest 40 percent of the income distribution. Significant differences persist even after controlling for levels of academic achievement and the gaps in degree completion rates are even larger than those in enrollment. Among 1988 8th graders scoring in the top third on math tests, three quarters of those from the highest socioeconomic quintile, had earned bachelor’s degrees by the year 2000. Only 47 percent of those in the middle SES quintiles and 29 percent of those in the lowest SES group had completed four-year degrees.

The information reported by the College Board points to a vital need to redouble efforts on the part of higher education institutions and at all levels of government to assure that growth in published prices is controlled and particularly, that the financial assistance available to students from low- and moderate-income families is sufficient to allow them access to quality higher education experiences.

This entry was posted on Friday, October 21st, 2005 at 3:32 pm and is filed under Aligning tuition, aid & appropriations. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Sandy Baum, senior policy analyst for the College Board and professor of economics at Skidmore College, has submitted comments on the latest reports from the College Board. Here’s what she has to say:

This week the College Board released its annual reports, Trends in College Pricing and Trends in Student Aid, along with a supplement to their 2004 report, Education Pays: The Benefits of Higher Education for Individuals and Society. Together, these reports provide a comprehensive overview of how the published price of a college education has risen over time and the trend in the amount and forms of the financial aid students receive to help them pay the price. Education Pays highlights the returns to individuals and to society as a whole from the public and private investments in higher education, as well as the continuing gaps in participation and success that make an increased focus on making college education accessible and affordable to all eligible students so vital.

Trends in College Pricing emphasizes the variation in the prices of the diverse offerings of the U.S. higher education system. In 2004-05, average published tuition and fee levels are $2,191 in public two-year colleges, $5,491 in public four-year colleges and universities, and $21,235 in the private nonprofit four-year sector. Adding room and board charges yields a published price of $12,127 for public four-year and $29,026 for private four-year institutions. However, even within sectors, prices vary significantly across states, regions of the country, and types of institutions.

The 7.1 percent ($365) increase for public four-year and the 5.4 percent ($112) increase for public two-year institutions are significantly lower than the increases in the past couple of years. This pattern of rapidly rising prices for a short-time when state and local appropriations are declining or growing slowly, followed by a return to more typical prices increases, is repeated each decade. However, the 40 percent increase in public four-year tuition and fee levels between 2000-01 and 2005-06, after adjusting for inflation, is significantly larger than any other five year increase over the past 30 years.

It is impossible to correctly interpret the impact of rising published prices on access and affordability without focusing on net price, the price that students actually pay after considering the subsidies they receive. The $129 billion in student aid distributed during the 2004-05 academic year yielded average aid of $10,100 per full-time equivalent student; $4,900 of this aid is in the form of loans and $4,500 is in the form of grants. The remainder comes through work-study and federal education tax credits and tuition and fee deductions. This aid covers both undergraduate and graduate education. Whereas graduate students receive 76 percent of their aid in the form of loans and only 22 percent in the form of grants, undergraduates receive 46 percent grants, 46 percent loans, and most of the remainder in tax benefits.

Grant aid per student continues to rise, even after adjusting for inflation. But after a brief period when grants actually grew more rapidly than loans, since 2001-02, loans have been outpacing grants. The Pell Grant maximum has stagnated — The maximum Pell Grant, which covered 35 percent of average public four-year tuition, fees, and room and board in 1994-95 and 42 percent in 2001-02, covered only 36 percent in 2004-05. While most of the grant aid offered by states and institutions is based on need, and need-based aid from both of these sources continues to grow, an increasing proportion is based on other criteria and is awarded to students who could afford to enroll even without that aid. The same is true of federal tax benefits.

The overall picture is that, while the published price of college can be a misleading indicator of affordability, the net price of a year of higher education continues to rise as a percentage of income only for students from the lowest-income families. The financial constraints faced by low- and moderate-income families, combined with the unequal educational opportunities available to children, contribute to startling differences in educational attainment. While the gap between the enrollment rates of high- and low-income high-school graduates has narrowed somewhat over recent decades, in 2003, 80 percent of students from families with incomes in the upper 20 percent of the income distribution enrolled in college immediately after high school, compared to 49 percent of those in the lowest 40 percent of the income distribution. Significant differences persist even after controlling for levels of academic achievement and the gaps in degree completion rates are even larger than those in enrollment. Among 1988 8th graders scoring in the top third on math tests, three quarters of those from the highest socioeconomic quintile, had earned bachelor’s degrees by the year 2000. Only 47 percent of those in the middle SES quintiles and 29 percent of those in the lowest SES group had completed four-year degrees.

The information reported by the College Board points to a vital need to redouble efforts on the part of higher education institutions and at all levels of government to assure that growth in published prices is controlled and particularly, that the financial assistance available to students from low- and moderate-income families is sufficient to allow them access to quality higher education experiences.

This entry was posted on Friday, October 21st, 2005 at 3:21 pm and is filed under Aligning tuition, aid & appropriations. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.