College data nerds love late October. Why? The College Board releases its annual Trends in College Pricing and Trends in Student Aid These reports, much like Sallie Mae’s How America Pays for College, are chock full of data and analysis to understand important trends in how American families plan and pay for college. At the very least, be sure to read the Highlights and Introductions in each report.
As in years past, it’s a mixed bag of results with sprinklings of good news, bad news and news that can be used to support seemingly contradictory arguments.
Good news from the reports:
- College loan borrowing declined for the fifth consecutive year.
- Undergraduates and their families borrowed 18% less than 5 years ago.
- For undergraduates, federal and non-federal loans constituted 36% of funds used to supplement student and family resources – the lowest amount in 20 years
- Only 10% of undergraduates leave college with more than $40,000 of debt
- Total grant aid now exceeds $125 billion having increased almost 90% from 1995-2005 and then another 79% in the next decade.
- Institutional grant aid has almost doubled over the past 10 years from $29.1 billion in 2005 -06 to $54.7 billion in 2015-16.
- Grant aid accounts for the highest level of funds used by undergraduates to supplement their own resources over the past 20 years.
Bad news from the reports:
- Pell Grant expenditures for the nation’s neediest student continued to decline from $39.1 billion at the peak in 2010 to $28.2 billion in 2015 (but is still more than 80% greater than pre-financial crisis spending).
- The number of Pell Grant recipients declined for the fourth consecutive year (but the percentage of undergrad recipients is up to 33% from 25% a decade earlier.
- Public funding (state and local appropriations) peaked in 2007-08 at $85.2 billion and declined 9% to $77.6 billion for 2014-15.
- We’re spending less on public education than 30 years ago: funding per FTE student is 11% lower than it was 30 years ago
- Declining state revenues per student are resulting in the rising prices at state schools.
Mixed news from the reports: could be better or could be worse
- Tuition and fees continue to outpace inflation — rising from 2.2% to 3.6%, but the rate of increase is less than previous years
- The favorable trend of net price declines from 2008-2010 reversed. Net prices paid are now increasing again, but – and it’s a big but – the net price paid at 4 year private and 2 year public schools in 2016-17 is still less than what was paid in 2006-07.
- Total federal grants to undergraduates nearly doubled from 2005-2015 to $41.7 billion in 2015-16, but $10 billion less than the peak in 2010-11.
Facts from the reports that we’ll all be using in the coming year:
- Total federal aid to undergraduate and graduate students: $240.9 billion
- Total non-federal borrowing: $11 billion
- More than 70% of full-time students receive some grant aid.
- In-state college costs vary widely (from $5,060 to $15,650) depending on the state of residence
- Undergraduates received an average of $14,460 per FTE student in financial aid
- Default rates are highest for borrowers with balances less than $5,000 and decline as balances increase
- 14 million students took $18 billion in tax credits and tax deductions. Nearly 25% of these recipients had incomes between $100,000 and $180,000.
- The federal work-study program is relatively small: 632k students earned $982 million
Here’s what struck me when considering the reports and their context.
- The College Board does a painstaking job of presenting apples-apples analysis for consistency, but be careful when comparing these data to data in other reports – particularly data related to cost of colleges (i.e. know if it’s 2 or 4 year, in-state or out, all-costs or just tuition and fees, etc).
- With a glass half-full approach, the data on loans is most encouraging to me: total amount borrowed is down considerably and most students are not over borrowing. The obvious conclusion: future college graduates will feel less strain than their predecessors. A less obvious question: is borrowing down because students are choosing less expensive schools, are they receiving more aid or is it a combination?
- The financial crisis is now nearing its 10th Anniversary. We’ve seen how the market (students, parents, governmental entities and colleges/universities) reacted and now how it is normalizing. In the teeth of the crisis and the subsequent recession, tuition and fees increased significantly when compared to inflation but families actually paid less because the federal government stepped up and provide more grant aid and tax credits. That trend has reversed as increases in aid no longer exceed increases in college costs — hopefully families will not fall into the trap of therefore increasing the amounts they borrow to reach for a school they cannot truly afford.
With data showing both advancements and set-backs in the college financing market, I continue to strongly believe that:
- Solving the college affordability crisis does not require a big government solution.
- The government can and should take specific steps to be more transparent with their customers – that’s right, students and parents are customers of the federal government when they take federal loans.
- Families have more control over selecting an affordable college than they may think and can manage the amount necessary to borrow by making more informed college choices. College “fit” includes affordability, not just academic and social comfort.
What do you think?
John Hupalo is the Founder of Invite Education and co-author of the recently released book: Plan and Finance Your Family’s College Dreams: A Parent’s Step-by-Step Guide from Pre-K to Senior Year