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Families are paying more out of pocket for college as tuition increases surpass grant aid

Breakneck increases in college tuition appear to be a thing of the past as annual price hikes continue to moderate. But that doesn’t mean students are getting a break: Grant aid is failing to keep pace with even modest increases in tuition, so families are still having to dig deeper, according to a series of reports released this week. 

The era of soaring college prices might be at an end, report says

By holding annual sticker price increases to about 3 percent for the last five years, schools have slowed the double-digit growth in tuition and fees witnessed at the height of the recession, according to a pair of studies released Wednesday by the College Board. Still, the amount of money students actually pay after taking grants, scholarships and tax credits into account, known as net price, continued to rise between the 2016-2017 and 2017-2018 academic years.

Published tuition and fees for four-year public colleges and universities this fall average $9,970 for in-state students, a 3.1 percent  increase. The average local, full-time student received enough grant aid and federal tax benefits to cover 58 percent of that cost. But that’s just tuition and fees. Net price for those students climbs to an average $14,940 when room and board are added. And even though grant aid and federal education tax credits are more than enough to cover the average tuition and fees at community colleges, full-time students still have an average $8,070 in living expenses to worry about.

“It’s true that some people can live at home and live off their parents, but a lot of students are independent and have to pay for their own housing and food,” said Jennifer Ma, policy research scientist at the College Board and co-author of the two reports on tuition and financial aid. “If they are going to school full time, they often can’t work full time.”

At private nonprofit colleges, tuition and fees after aid was $14,530 this fall, up from $13,890 the prior year. Including room and board, the net price rose from $25,490 to $26,740 for full-time students. Still, the average net tuition and fees at private nonprofit universities is lower this fall than it was in the 2007-2008 academic years because the increase in grant aid and tax benefits was larger than the rise in published prices.

This trend could destabilize some small private colleges if it continues

Private universities have been setting their sticker prices artificially high and then offering deep discounts to attract students. A recent report from the National Association of College and University Business Officers found that for every dollar in gross tuition revenue private colleges received from first-time full-time students in the 2016-2017 academic year, schools used nearly half for grant-based financial aid.

With public colleges and universities educating the vast majority of students, state contributions to higher education play a critical role in college affordability. State-funded student financial aid, however, has inched up only slightly in recent years. An annual survey from the National Association of State Student Grant and Aid Programs released Monday shows states awarded about $12.5 billion in financial aid in the 2015-2016 academic year, an increase of less than 1 percent from the prior year. About two-thirds of the money states awarded in 2015-16 was based on financial need.

Enrollment and population trends are key factors in the levels of state aid being dispensed, said Frank Ballmann, director of the association’s Washington office. College enrollment has trailed off since reaching peaks before and during the recession. The stronger the economy, the less pressure people feel to earn a degree. What’s more, a number of states in the Northeast and Midwest have below-average or weak population growth that has slowed the pipeline of college students. With fewer students enrolling, state legislatures are less inclined to dole out more aid.

“The number of high school seniors is declining in some states by as much as 5 percent. That makes it harder to award any kind of aid,” Ballmann said. “And to the extent that the economy is improving, that makes people a little less likely to qualify for need-based aid.”

Median family income has increased at an average rate of 0.3 percent between 2007 and 2016, but tuition has risen much faster than family income, Ma said. Even if grants and scholarships eliminate tuition expenses, paying hundreds of dollars for books, fees and transportation can be taxing for low-income families. Stillfewer families are taking out loans to pay for college. Annual education borrowing declined for the sixth consecutive year in part because enrollment is waning, while grant aid continues to climb, albeit slowly.

“When grant aid was growing rapidly, many students were protected from the price increases, but as the growth in federal and state grant aid has slowed, the average net prices students pay are rising,” said Sandy Baum, a fellow at the Urban Institute who co-authored two new College Board reports.

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