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Personal Finance > College

College costs spike again
Tuition climbs fastest at public schools, while aid helps lower-income students less, study finds.
October 19, 2004: 10:58 AM EDT
By Jeanne Sahadi, CNN/Money senior writer

NEW YORK (CNN/Money) – If only salaries would rise as rapidly – and as consistently – as college costs.

The average tuition for undergrads attending four-year public universities jumped 10.5 percent this year. That helped to push the average price of attendance, including room, board and fees, up $824 to $11,354.

That's one of the findings in "Trends in College Pricing 2004," a report released Tuesday by the College Board, a non-profit membership association of 4,500 schools, colleges and universities.

The tuition increase at public schools isn't as steep as it was last year – when average tuition rose a record 13 percent – but it is still high by historical standards.

The average tuition at four-year private colleges, meanwhile, rose 6 percent, raising the total cost of attendance by $1,459 to $27,516.

Sticker price vs. net price

While college costs can lead to sticker shock, in reality what many students and their parents actually pay is less than the advertised price.

The College Board found that 25 percent of full-time undergrads at public schools and 60 percent of private college students received institutional grant aid, which is money that never needs to be repaid.

The average cost of tuition and fees by region, from most to least expensive:
Region Avg tuition/fees '04-05 
New England $6,839 
Middle states $6,300 
Midwest $6,085 
Southwest $4,569 
South $4,143 
West $4,130 
 *Middle states are defined as NY, NJ, PA, DE, MD
 Source: The College Board

Those grants, in combination with federal tax credits and deductions for tuition plus federal grants, lowered the cost of attendance by an average of more than $3,300 per student at public four-year institutions, and $9,400 at private institutions in 2003-04, the latest year for which data are available.

But the load is still a heavy one. Despite the growth in funding for grant aid over the years, the College Board found that compared with 10 years ago, the net cost of attendance (in 2003 dollars) has risen $1,000 for public university undergrads and $2,000 for private-college undergrads.

What families can't cover with grants and savings they finance with loans, which have grown at a faster rate than grant aid in the past two years.

And the Board found that an increasing percentage of student loans is coming from private sources, which tend to be more expensive than subsidized federal loans.

Low-income students see less benefit

The College Board notes that to just look at the average aid per student or the average net price of college after accounting for aid and tax benefits doesn't tell the whole story.

The average cost of tuition and fees by region, from most to least expensive:
Region Avg tuition/fees '04-'05 
New England $25,660 
Middle States $21,439 
West $19,998 
Midwest $18,690 
South $17,317 
Southwest $15,867 
 *Middle states are defined as NY, NJ, PA, DE, MD
 Source: The College Board

It doesn't reflect, for instance, the changes in how grant aid is distributed. While grant funding has increased overall in the past 10 years, merit-based aid, which tends to favor middle- and upper-income students, has grown at a much faster rate than need-based aid for lower-income students, the College Board's senior policy analyst Sandra Baum said.

For example, funding for the federal Pell grants, a staple of aid for low-income students, rose 6 percent in 2003, but there also was an increase of 7 percent in the number of Pell recipients. As a result, the average grant fell 1 percent in constant dollars.

What's more, the purchasing power of the Pell grant has declined during the past 25 years. In 1980-81, a Pell grant covered 35 percent of the total annual cost of attending a public university. In 2003-04, it covered 23 percent.

And because of income restrictions and other factors, the federal tax credit and tax deduction for tuition benefit more middle- and upper-income families, Baum noted.

Why costs are rising

The College Board doesn't examine the reasons for tuition increases in its report. But Baum said she sees a correlation between the rise in tuition to the decline in state funding at public schools and to the reduction in endowment income and private giving at private schools.

She also attributes the price hikes at both private and public schools in part to the rising costs of health care – a component of compensation, which is a big part of school budgets – and to the cost of technology, which schools invest in to maintain state-of-the-art facilities.

Bachelor's means more bucks

In a separate report, "Education Pays," the College Board looked at the earnings premium of adults who earned a college degree versus those who have a high-school diploma or a couple of years of college.

In 2003, those workers with bachelor's degrees earned a median of $49,900. Those with a few years of college but no degree had median earnings of $35,700, while those with a high-school diploma earned a median income of $30,800.

Over a 40-year career, the Board estimated, a college graduate is likely to earn about 73 percent more than a high school graduate.  Top of page

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