College Tuition Increases Slow, but Government Aid Falls
By Douglas Belkin and Caroline Porter
Updated Oct. 22, 2013 8:13 p.m. ET
After decades of rampant growth, the rate of tuition increases at U.S. colleges and universities has slowed for the second academic year in a row, but government aid has fallen, continuing a cycle of rising costs and debt for American students.
Published tuition and fees rose 2.9% for in-state students at four-year public schools, the smallest one-year increase since 1975-76. At private schools, tuition and fees rose 3.8%, a bit lower than in recent years, according to a report from the College Board, a New York nonprofit that tracks university costs.
“The news in terms of college price increases is that it does seem the spiral is moderating, not turning around, not ending, but moderating,” said Sandy Baum an economist at the College Board.
After adjusting for aid, students attending public four-year institutions this academic year are paying an average of $12,620, up $220 from last year, for tuition, room and board. Private-school costs rose $700, to $23,290.
The continued rising costs come as student debt has topped $1 trillion and the default rate on student loans has risen for six straight years. One in 10 students now defaults within two years of starting repayment, according to Department of Education figures released earlier this month.
The College Board report paints a picture of a sector that after decades of extravagant spending is responding to a demographic dip in the number of high-school seniors; years of stagnant household incomes; and rising political pressure over student debt.
In August, President Barack Obama championed a ratings system that could involve tracking the incomes of college graduates to create a return-on-investment calculator for individual schools to help prospective students better gauge the value of a degree before they pursue it.
These combined forces have helped drive down the net cost, which includes federal and school grants, at a private four-year college by $650 since 2007, when it cost $23,940 in today’s dollars.
But shrinking state aid for public colleges and universities has meant the cost of public schools has jumped $1,770 in inflation-adjusted dollars. The amount of government aid received last year fell to $6,646 for every full-time student at those institutions. Five years ago, each student received $9,111 in today’s dollars.
The moderation in tuition rises is a continuation of a trend that began last year, said Molly Corbett Broad, president of the American Council on Education.
“I think the key issue that we realized last year is that the marketplace was just saturated, and continuing to raise tuition at rates which were like 7% a year was just unsustainable,” Ms. Broad said.
Students face a job market that increasingly demands post-secondary credentials but doesn’t always pay well for them, especially in the short run. Samer Abdelmajid, 18 years old, started at the University of Illinois at Chicago this fall as a freshman. He works part time at McDonald’s to cover expenses while he studies health-information management. He said the strain was “definitely worth it.”
“Without a degree, you’re very limited,” he said. “It’s a way of getting out and moving up.”
But getting started is increasingly rocky. Among students who begin paying their student loans back before they are 21, the default rate is 28%, said Susan Dynarski, an economist at the University of Michigan.
“There are a lot of kids that went to school to escape a weak labor market, they took out loans, and now they’re going back into the labor market, and many are still experiencing some distress,” she said.
Those problems dissuade some students from getting a college education. Weak outcomes, combined with fewer graduating high-school seniors and stagnant household incomes, run up against the laws of supply and demand, said Richard Vedder, director of the Center for College Affordability and Productivity in Washington. He predicts a continued rocky path for colleges, students and their families.
“College is still more costly for kids than it has been,” said Mr. Vedder. “The key ratio is family incomes to the cost of college, and since family income isn’t improving, the cost of college will probably continue to get worse.”
At the very least, the specter of all that debt has made students much more price-conscious.
Taylor Kimberly, 23, a full-time student majoring in business at Edgewood College in Madison, Wis., previously attended Madison Area Technical College so he could get his general credits more cheaply.
“It makes a lot of sense to do that first,” according to Mr. Kimberly, who said he also works part time as a bike mechanic to cover his living expenses, while his parents, both salespeople, pay for the $12,000 tuition each semester.
“It’s almost like mandatory to go to college,” said Mr. Kimberly, talking about his parents’ approach to college. “Tuition seems very expensive to me. That’s because I don’t have a full-time job making a salary.”
Geography also plays an increasingly important role in college affordability, as states recover from the recession at different rates and set their higher-education subsidies at different levels. A full-time student paying in-state tuition at a public school in New Hampshire, for instance, is the beneficiary of $2,482 in state aid. Oil-rich Wyoming, meanwhile, subsidizes its schools with more than $15,000 a student.
Nicole Preucil, 23, hunched over a textbook on Tuesday afternoon on campus at University of Illinois at Chicago. The California native moved to Chicago for a two-year graduate program in social work and now plans to graduate in May with about $60,000 in loans.
“I think tuition is absolutely too much,” said Ms. Preucil, who works part time at Starbucks to cover living expenses. Her parents, one disabled and the other working at a retail store, don’t provide financial support. “I kind of didn’t realize how expensive it was going to be here.”
For her undergraduate degree at Sonoma State University, Ms. Preucil cobbled together scholarships and grants, worked part time and graduated with $10,000 in student loans. “I think about my loans, and I try to pay off my interest,” she said. “I think it will take a long time in my profession to pay it off.”