College students are getting hit with a double whammy.
Two annual reports out today from the College Board show that across higher education sectors, prices rose faster than both the rate of inflation and the median rise in household incomes—while financial aid has been climbing more slowly, increasing the net burden on students.
Published prices for tuitions, fees, room and board hit new highs, increasing 2.8% at two-year public colleges, 3.1% for in-state students at four-year public colleges, and 3.5% at private colleges. (See chart below.)
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What really matters to the price of a degree, however, is the compound effect of annual changes in college prices and financial aid. And over the long term, net prices—that is, the amount families actually pay after grants and tax benefits—have risen for eight straight years at public four-year institutions, seven years at public two-year institutions, and six years at private colleges.
“When grant aid was growing rapidly, many students were protected from the price increases,” coauthor Sandy Baum, who’s also a researcher at the Urban Institute, says in a press release accompanying the new reports—”but as the growth in federal and state grant aid has slowed, the average net prices students pay are rising.”
Average Prices for Full-Time Students in 2017-2018
It’s perhaps most striking to view the price increases in relation to a typical family’s ability to pay. College Board reports have found average annual increases in published prices between 2.2% and 2.7% over the past decade—a period when the average annual increase in median family income, adjusted for inflation, was just 0.3% a year.
Those stagnant wages exacerbate the pressure of rising college prices, the report authors write.
Slow Rise in Financial Aid
More than 70% of full-time students now receive grant aid to help pay for college, the report on financial aid found. The $8,440 awarded per undergraduate in 2016-17 is an impressive 61% higher than it was a decade earlier.
Yet most of that increase happened during the first half of that decade, the report says, when grant aid per student increased 42%. (The College Board’s financial aid report lags the pricing report by a year, and therefore lacks 2017 data.)
Average grants are, predictably, much higher in the private sector, where prices are also higher than among public schools. Full-time students at public and private nonprofit four-year colleges receive an average of $5,830 and $20,210, respectively, in grant aid and tax benefits. Those awards cover nearly 60% of tuition and fees in each sector.
Published prices and average grants vary between institution types, as well. Within both private and public four-year colleges, doctorate-granting universities charge higher prices and award larger grants. Those tend to be prominent research universities and state flagship universities, both of which usually charge higher tuition and have more resources than regional colleges, says Jennifer Ma, coauthor and senior policy research scientist at the College Board.
The largest form of student aid is federal education loans, through which the government paid out $58.1 billion last school year. Grants from individual colleges make up the second-largest type of aid, worth a total $46.1 billion for undergraduate students in 2016-17. Financial aid from states is far lower, at about $10 billion a year awarded in state grants.
In terms of the number of recipients, tax benefits—in the shape of the American Opportunity Tax Credit, Lifetime Learning Credit, and tuition and fees deduction—are the most commonly used form of reducing the price of college. That may sound counterintuitive, since the students first have to pay tuition bills before claiming a tax credit or deduction. But in 2016-17, 13.2 million students received some kind of federal tax benefit for paying college bills, to the tune of nearly $18 billion.
State by State
The reports also offered a trove of data on the varying costs of a public education—and showed dramatic discrepancies on a state-to-state basis.
At community colleges, for instance, tuition and fees range from $1,430 in California and $1,760 in New Mexico to $6,840 in New Hampshire and $7,980 in Vermont. And at public-four year colleges, published tuition and fees start at $5,220 in Wyoming and $6,360 in Florida. Vermont and New Hampshire are again the most expensive, with tuition and fees at $16,040 and $16,070, respectively.
In nine states, sticker prices and fees at public colleges have either fallen or increased by less than 5% in total over the past five years. In Washington state, for example, back-to-back tuition cuts led to an overall 16% decrease in published tuition and fees over that time period.
Yet in eight other states, prices increased by 20% or more. Louisiana, which has been clobbered by repeated state budget cuts in recent years, saw published rates increase by a whopping 48%. (Interestingly, the difference between Washington and Louisiana’s in-state charges for tuition and fees in 2017-18 was just $180.)
State grant aid, too, varies dramatically. Ten states award less than $200 per student in grants, according to the report. Of the fourteen that award more than $1,000, South Carolina tops the list—handing out $2,100 per full-time undergraduate, largely in merit-based grants.