$90 Billion Available in Student Financial Aid,
with Scholarship Growth Outpacing Loan Growth
But, Feeling the Economic Squeeze, Colleges Continue to Raise Tuition
Trends in Student Aid 2002
The College Board's Trends in Student Aid 2002 delivers good news for students looking for assistance in financing a college education. The College Board reports that student aid reached more than $90 billion in 2001 - 2002, an increase of 11.5 percent over the preceding year (or 10 percent after adjusting for inflation). Over the past decade, total aid has increased by 117 percent in constant dollars (see Exhibit 3).
For the second consecutive year, grant aid grew more rapidly than loan aid to college students. However, the decade-long trend finds growth in loans outpacing growth in grant aid. In 1991-92, loans accounted for 47 percent of student aid, compared to 54 percent in 2001-02. Grants declined from 50 percent to 39 percent of total aid over this time period (see Exhibit 4).3
While the increase in total aid is encouraging, said Caperton, the increased reliance on loans must be considered critically. Unsubsidized loans (both student loans through the unsubsidized Stafford program and parent loans through the PLUS program), which now account for more than half of federal education loan volume, are available to students at all income levels. Low-income students are also eligible for both subsidized loans and Pell Grants from the federal government. Although Pell Grants increased by 23 percent in inflation-adjusted dollars in 2001 - 2002, the maximum Pell Grant still covers only 42 percent of average public four-year institution fixed costs (tuition and fees, room and board), compared to 84 percent 20 years ago (see Exhibit 5).
Over the past year the College Board has been examining critical college finance issues such as the grant/loan ratio, the increased reliance on borrowing, and the value of the Pell Grant.
"A year ago, the College Board created a Blue Ribbon Student Financial Aid Panel, to conduct a national conversation on how to ensure that a lack of student financial aid is not a barrier to higher education for those students who are prepared for and have a desire to attend college," said Caperton. The Blue Ribbon Panel is scheduled to present its findings to the Administration and to Congress this December. "As Congress considers the reauthorization of the Higher Education Act, we believe that the Panel's findings will greatly help to clarify the central issues involved in improving the federal student financial aid system to facilitate access to higher education," he said.
3 - In 1998, the federal government implemented education tax credits. These credits now constitute 6 percent of total student aid, causing both grants and loans to decline slightly as a proportion of the total.
