Press Releases

The College Board's Annual Reports on College Pricing and Financial Aid Show Tuition Increases are Smaller than Last Year, but Still High by Historical Standards

A New Companion Report Documents Substantial Returns for Individuals and for Society from Investment in Higher Education

10/19/04

Washington, D.C.—The College Board today announced that tuition increases are smaller than last year's increases, but they are still high by historical standards; all forms of student aid are growing rapidly, but loans outpaced grant aid for the second year in a row. Evidence of this, along with this year's average college prices and 2003-04 student aid data, are documented in reports released today, Trends in College Pricing 2004 and Trends in Student Aid 2004. The findings from a new companion report, Education Pays: The Benefits of Higher Education for Individuals and Society, were also released.

The College Board's new report, Education Pays, shows that investment in higher education has a significant return both for the individual and for society as a whole. Education Pays includes evidence that higher levels of education result in higher earnings for all racial/ethnic groups, that college graduates display higher levels of civic participation than others, and that their children attain higher levels of education.

"Most of us know that there are significant benefits that come with a college degree. That is why so many Americans work so hard to make the dream of college a reality for their children," said College Board President Gaston Caperton, commenting on Education Pays. "But it is very powerful to see such strong and varied statistical evidence of the individual and societal benefits presented together in this way."

Trends in College Pricing 2004¹

In 2003-04, the amount the average student actually paid for a public four-year institution, after receiving grant aid and education tax benefits, was about $1,300 per student. After adjusting for inflation, this is less than students paid a decade earlier (see Trends in College Pricing, Figure 7). While data on student aid levels for the current academic year are not yet available, this year's increase in tuition almost certainly increased the average net price.

Average College Tuition and Fees 2004-05 vs. 2003-04

• At four-year public institutions, tuition and fees average $487 more than last year ($5,132 vs. $4,645, a 10.5 percent increase). Based on last year's financial aid levels the average student at a four-year public institution pays about $1,800 after an estimated $3,300 in grant aid and tax benefits are considered.
• At two-year public institutions, tuition and fees average $167 more than last year ($2,076 vs. $1,909, an 8.7 percent increase). On average, the grant aid received by these students covers the entire amount of tuition and fees.
• At four-year private institutions, tuition and fees average $1,132 more than last year ($20,082 vs. $18,950, a 6 percent increase). The average student at a four-year private institution received about $9,400 in grant aid and education tax benefits in 2003-04. A similar amount of student assistance this year would yield an average net price of about $10,700 (see Trends in College Pricing, Table 1, Figure 7).

The average net price conceals significant differences among students. In recent years, changes in the distribution of state and institutional grant aid, as well as the introduction of education tax benefits and the tuition and fee deductions, have benefited middle- and upper-income students more than lower-income students.

There is considerable variation in the tuition levels charged by colleges and universities. Almost three quarters of full-time students at four-year public institutions face tuition and fees below $6,000, and only 4 percent of these students are enrolled in institutions charging $9,000 or more. About 25 percent of full-time students enrolled in private institutions face published tuition levels less than $15,000, while 30 percent of those students attend schools with a published price of $24,000 or higher (see Trends in College Pricing, Figure 3).

The College Board also looked at trends in total charges, which include room and board, in addition to tuition and fees. When total charges are considered, percentage increases over time have been somewhat smaller, especially in the public sector.

Average Total Charges: Tuition, Fees, Room and Board 2004-05 vs. 2003-04

• At four-year public institutions, total charges average $11,354 ($824 more than last year's $10,530—a 7.8 percent increase).
• At four-year private institutions, total charges average $27,516 ($1,459 more than last year's $26,057—a 5.6 percent increase) (see Trends in College Pricing, Table 1).

Trends in Student Aid 2004²

In 2003-04, student aid reached more than $122 billion, an increase of 11 percent over the preceding year after adjusting for inflation (see Trends in Student Aid 2004, Tables 1 and 2). After excluding private student loans, however, total aid was $111 billion in inflation-adjusted dollars, an increase of 9 percent over the preceding year. Full-time students received an average of $10,472 in aid, including $3,986 in grants, $540 in education tax benefits, and $5,840 in loans (see Trends in Student Aid, Table 7).

All forms of student aid are rapidly increasing, but students are relying more heavily on private loans—the fastest growing component of funds used to finance college. Grant aid grew by 6 percent in inflation-adjusted dollars in 2003-04. The volume of federal education loans rose by 13 percent and borrowing through alternative private loan programs increased by about 43 percent between 2002-03 and 2003-04, after adjusting for inflation (see Trends in Student Aid, Table 6).

Ten-Year Trend

Over the past decade, after adjusting for inflation, total aid has increased by 122 percent, grant aid has increased by 84 percent, and education loan volume has increased by 137 percent. Part of the increase in total aid volume is due to increased enrollments. After adjusting for inflation, grants per full-time equivalent student rose 64 percent and loans rose 111 percent (see Trends in Student Aid, Table 2).

Loans vs. Grants

During the late 1990s and through 2001, grants grew faster than loans. But slower growth in grant aid in 2002-03 and 2003-04 has caused students to rely more heavily on loans. Last academic year, loans constituted 56 percent of aid, grants 38 percent, work 1 percent, and education tax benefits 5 percent. However, the composition of aid differs greatly for undergraduate and graduate students. Grants constitute 44 percent of undergraduate aid, but only 22 percent of aid received by graduate students. About half of undergraduate aid is in the form of loans, whereas three quarters of graduate student aid is loans (see Trends in Student Aid, Table 6, Figure 5).

Pell Grants and Other Need-Based Aid

The Pell Grant program is considered the cornerstone of aid for low-income students. In 2003-04, $12.7 billion in Pell Grants funded 5.1 million students with average grants of $2,466. Because there was an estimated 7 percent increase in the number of Pell recipients that year, the average grant fell by 1 percent in constant dollars, despite a 6 percent increase in total Pell funding (see Trends in Student Aid 2004, Figure 8).

The purchasing power of the Pell Grant has been fairly stable over the past decade, but has declined considerably over the long-term. For example, in 2003-04, the average Pell Grant covered 23 percent of the total charges at the average four-year public institution, but in 1980-81, it covered 35 percent of total charges in that sector.

Institutional Aid

Institutional aid constitutes about half of all grant aid received by students. After adjusting for inflation, institutional grants have doubled over the past decade. About 25 percent of full-time undergraduate students enrolled in public colleges and universities and 60 percent at private institutions receive institutional grant aid. However, as is the case for state grants, a quarter of which are now non-need-based, the proportion of institutional grant aid being awarded to the lowest-income students is declining (see Trends in Student Aid, Figures 9, 10, 11). "As we mark the fiftieth anniversary of the creation of a national system of need-based aid, we should work collectively to renew our commitment to college access and remove persistent barriers to higher education for low-income students," said Caperton. "It is our hope that the upcoming reauthorization of the Higher Education Amendments will go a long way toward this goal."

Education Pays: The Value of a College Education

The College Board's new report, Education Pays, examines the benefits to individuals and to society from our investment in higher education. It also documents the uneven participation rates in higher education across different segments of U.S. society.

"The College Board's new report, Education Pays, shows that students who attend college obtain a wide range of personal, financial, and other lifelong benefits; likewise, taxpayers and society as a whole receive many direct and indirect benefits when our country's citizens have access to college," said Caperton. "Uneven rates of participation in higher education across society should be a matter of urgent interest not only to the individuals affected, but also as a public policy issue at the federal, state, and local levels."

Education Pays presents evidence of both the private and public benefits of higher education. It also sheds light on the distribution of these benefits by examining the progress and the persistent disparities in participation in postsecondary education. According to the report, some of the benefits to individuals include:

• a correlation between higher levels of education and higher earnings for all racial/ethnic groups and for both men and women;
• the income gap between high school graduates and college graduates has increased significantly over time (Education Pays, Figures 4, 5, and 6); and
• the earnings benefit to the average college graduate is high enough for graduates to recoup both the cost of full tuition and fees plus forgone earnings while in college in a relatively short period of time (see Education Pays, Figure 3).

As is the case for the individuals who attend college, the impact of higher education on society as a whole includes both monetary and nonmonetary benefits. The report shows that societal benefits include:

• lower levels of unemployment and poverty for those with higher levels of education, making college graduates less likely to depend on social safety-net programs, and therefore decreasing demands on public budgets;
• lower smoking rates;
• lower incarceration rates; and
• an increase in civic participation, including volunteer work, voting, and blood donation.

Education Pays shows that despite the progress we have made in improving educational opportunities, participation in higher education differs significantly by family income, parent education level, and other demographic characteristics.

According to Caperton, "Given the extent of higher education's benefits to society, we need to work aggressively to close gaps in access to college. It is a matter of dire importance for the country as a whole."

1. Trends in College Pricing 2004 is based on data collected in the College Board's Annual Survey of Colleges, 2004-05. It reports tuition and fees for the current academic year, 2004-05.

2. Trends in Student Aid 2004 provides the most complete data available on federal, state, and institutional aid to students and parents through the most recently completed academic year, 2003-04. Trends in Student Aid 2004 does not include projections of aid to students in 2004-05.

For more information, contact Jennifer Topiel or Chiara Coletti at 212 713-8052.