Even as tuition and fees increased last year, the amount students borrowed in private loans declined by almost 50 percent, according to the first widely accepted estimate of that drop, which was expected to be significant.
In 2008-9, lenders issued about $11.9-billion in education loans not backed by the federal government. Those loans consist primarily of traditional private loans but also include loans made by states. That represents a drop of about $11.9-billion, after adjusting for inflation, according to two reports issued Tuesday by the College Board, "Trends in College Pricing 2009" and "Trends in Student Aid 2009."
Private loans represent a small—but until recently, rapidly growing—portion of the education-loan market. Sandy Baum, senior policy analyst with the College Board and an author of the reports, said the shift was "really not surprising at all."
Because of turbulence in the credit markets, fewer lenders made private education loans last academic year. At the same time, the government raised the loan limits for undergraduates who borrow federally backed but unsubsidized Stafford Loans.
Mark Kantrowitz, publisher of the student-aid advice Web site FinAid, thinks legislation being debated in Congress would further reduce private-loan volume by increasing borrowing in the campus-based Perkins Loan program.
Federal borrowing, including loans made to graduate students and parents of undergraduates, continued to increase last year, growing by $11-billion or 15 percent. Total borrowing dropped by about 1 percent, after adjusting for inflation, which was a relatively high 5.6 percent.
In 2008-9 undergraduates received an average of $10,185 in financial aid, including $5,041 in grants and $4,585 in federal loans. The number of Pell Grant recipients grew to 6.1 million, up from 5.4 million in 2007-8.
Trends in Pricing
For pricing, because more-current data were available from colleges, the College Board looked at the 2009-10 academic year. Average in-state tuition and fees at public four-year institutions increased 6.5 percent from 2008-9, while out-of-state tuition and fees increased 6.2 percent. In dollar amounts, in-state tuition and fees grew from $6,591 to $7,020, and out-of-state ones grew from $17,460 to $18,548, in current dollars.
Private nonprofit four-year institutions saw an increase of 4.4 percent, with the average cost of tuition and fees up to $26,273, or $1,096 more than last year. Public two-year colleges saw an increase of 7.3 percent, or $172, with the cost of tuition and fees reaching $2,544.
For-profit colleges saw an increase of 6.5 percent, bringing tuition and fees to $14,174, up $859.
The Consumer Price Index fluctuated quite a bit from July 2008 to July 2009, the period the College Board used for the report, but declined 2.1 percent for the year. This means inflation-adjusted increases in prices this year are larger than current dollar increases.
While published tuition and fees continue to rise, most students do not pay the list price, the report notes. About two-thirds of full-time undergraduates receive grants, and even those who do not may receive federal tax credits and deductions that help defray their expenses.
Full-time students at public four-year colleges and universities will receive an estimated average of $5,400 in grant aid and tax benefits in 2009-10, bringing their net tuition and fees from about $7,000 to about $1,600 for in-state students. Full-time students at private nonprofit four-year colleges receive an estimated average of $14,400 in grants and tax benefits, bringing their average net tuition from about $26,300 to $11,900.
At public two-year colleges, the estimated average grant and tax-benefit amount, $3,000, actually exceeds the average published tuition and fees of $2,500. This means those students could have some aid left to go toward living expenses.
Average net tuition and fees have declined steadily since the late 1990s at public two-year colleges, but increases in living costs prevent that change from reducing students' net cost of attendance. The real issue at those institutions is "how do people live when they're not working full time?" said Ms. Baum, who is also a former professor of economics at Skidmore College.
From 2004-5 to 2009-10, published tuition and fees rose by 15 percent in inflation-adjusted dollars at private nonprofit four-year colleges and by 20 percent at public four-year colleges, but average estimated net prices are about $1,100 lower (in 2009 dollars) at private institutions and $400 lower at public ones than five years ago, according to the reports. Net tuition and fees at all four-year colleges increased about 2 percent in constant dollars in 2009-10 over the previous year.
All students pay living costs, and have educational expenses beyond tuition and fees that go into aid calculations. In its analysis of net prices, the College Board applies all grant and tax-benefit aid to the listed price of tuition and fees.
Almost a quarter of full-time undergraduates attending four-year colleges attend an institution where published tuition and fees are below $6,000 a year, and about a quarter attend institutions with a published price of $21,000 or higher.
A searchable database with statistics on tuition and fees at more than 3,100 colleges and universities is available on The Chronicle’s Web site.