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College prices up again as states slash budgets

By Justin Pope
AP Education Writer / October 26, 2011

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As President Obama prepared to announce new measures Wednesday to help ease the burden of student loan debt, new figures painted a demoralizing picture of college costs for students and parents: Average in-state tuition and fees at four-year public colleges rose an additional $631 this fall, or 8.3 percent, compared with a year ago.

Nationally, the cost of a full credit load has passed $8,000, an all-time high. Throw in room and board, and the average list price for a state school now runs more than $17,000 a year, according to the twin annual reports on college costs and student aid published Wednesday by the College Board.

The large increase in federal grants and tax credits for students, on top of stimulus dollars that prevented greater state cuts, helped keep the average tuition-and-fees that families actually pay much lower: about $2,490, or just $170 more than five years ago. But the days of states and families relying on budget relief from Washington appear numbered. And some argue that while Washington's largesse may have helped some students, it did little to hold down prices.

"The states cut budgets, the price goes up, and the (federal) money goes to that," said Patrick Callan, president of the National Center for Public Policy and Higher Education. "For 25 years we've been putting more and more money into financial aid, and tuition keeps going up. We're on a national treadmill."

Nonetheless, President Obama planned to announce a series of steps to help with one of the consequences of rising college prices: student debt. This year total outstanding student loan debt has passed $1 trillion, now exceeding credit card debt. And concerns about student loan debt have been front and center with many of the Occupy Wall Street protesters.

Obama will use executive authority for two loan-relief measures. First, he will move up the start date -- from 2014 to 2012 -- of a plan Congress already passed that reduces the maximum repayment on federal student loans from 15 percent of discretionary incomes to 10 percent. The White House says about 1.6 million borrowers could be affected, and that remaining debt would be forgiven after 20 years, instead of 25.

The administration also will allow 5.8 million borrowers with outstanding loans from two federal programs -- direct lending the Family Education Loan Program -- to consolidate into a direct loan, potentially saving some borrowers hundreds of dollars per month.

Those changes may not help new borrowers much, but they could put cash in the pockets of millions still paying back their loans. They also could encourage more borrowers to take advantage of the income repayment options that are already in place, but not widely known. Finally, by consolidating into direct lending, more could qualify for that program's public service loan forgiveness, which can forgive debts after just 10 years of repayments for people working in nonprofit or public service jobs.

In the College Board's latest price report, some of the increase was driven by huge increases at public universities in California, which enrolls 10 percent of public four-year college students and whose 21 percent tuition increase this year was the largest of any state.

But even without California, prices would have increased 7 percent on average nationally -- an exceptional burden at a time of high unemployment and stagnant family incomes.

Terry Hartle, senior vice president at the American Council on Education, which represents colleges in Washington, said the cause of the price increases for the 80 percent of college students who attend public institutions is clear. State appropriations to higher education declined 18 percent per student over the last three years, the College Board found, the sharpest fall on record.

"To see increases of 20 percent, as we saw in California, to see gains of 15 percent in other states, is simply unprecedented," Hartle said. "Tuition is simply being used as a revenue substitute in many states."

The College Board reports roughly 56 percent of 2009-2010 bachelor's degree recipients at public four-years graduated with debt, averaging about $22,000. At private nonprofit universities, the figures were higher -- 65 percent and around $28,000. Those figures are likely to rise, though private borrowing -- usually more dangerous than government loans -- has been falling.

"Psychologically, practically, it's a big number, and it will inform important choices, like when and whether you buy a home, start a family, save for retirement or take the risk of starting a new business," said Lauren Asher, president of The Institute for College Access and Success, who also applauded the Obama announcement.

And Asher and other experts emphasize that the types of loans students take out can be as important as the amount. In general, a college degree remains a good investment.

Other slivers of what passes for good news: While several states had double-digit percentage increases, there were wide variations, and Connecticut and South Carolina held under 3 percent. Roughly half of students are enrolled in nonprofit colleges attend institutions charging under $10,000, and fewer than 1 in 10 attend institutions listing prices over $36,000.

Meanwhile, both community colleges and private four-year colleges reported lower tuition inflation than public universities.

At nonprofit private four-year colleges, tuition and fees were up 4.5 percent to $28,500. Factoring in aid, the average total net cost, including room and board, was about $22,970 -- lower than five years ago. At community colleges, where list prices rose 8.7 percent nationally to just under $3,000, net costs also are lower than five years ago, and aid generally covers the whole price.

Still, while net costs are important to note, they don't tell the whole story. They don't cover living costs, which for many students are a higher obstacle than tuition, especially if they can't work as much while enrolled.

And the aid dollars that help lower the average net price don't always go to the neediest students.

Colleges award merit scholarships. Federal Pell Grants do support the neediest, and spending on them has nearly doubled in the last two years to around $35 billion (9.1 million students got grants averaging $3,828).

But the latest College Board figures highlight a rapid recent increase in indirect government support through tuition and other tax credits, which have reached almost $15 billion. Around 12 million people are now taking advantage of tax benefits averaging more than $1,200. And while recent changes make low-income families better able to take advantage of those credits, a growing proportion of the benefit goes to families earning more than $100,000.

The tax credit program, dramatically expanded in 2009, "really changes the story of how the federal government subsidizes students," said Sandy Baum, the economist who directs the College Board's reports. The credit is "not so much a middle-income benefit as we're used to thinking about it."

Some states are not only cutting their appropriations but not even paying what they've promised. Illinois is late on payments worth $500 million to nine campuses this year.

The percentage increases in California, once widely considered to have the best-value public universities in the world, are so high in part because the base prices of past years were low. Prices there still aren't high by national standards, but this year for the first time, California's tuition and fee rates were above the national average. That in 2011 California's public universities would be cost more than the national average would have been unimaginable to most experts a decade ago.

Hartle and others say this year's sharp increases came despite the last chunks of stimulus dollars from Washington used to plug holes in education spending. Looking forward, state budgets remain broken and there's little indication Washington will come riding to the rescue.

"I'm not exactly sure where higher education in the United States is going," he said. "But I have a feeling California is going to get there first."

Also, on Tuesday, an Education Department official testified to a House subcommittee that personal details of as many as 5,000 college students were temporarily visible to other students on the departments' direct loan web site earlier this month.

The episode lasted six or seven minutes on Oct. 12 and happened during a reconfiguration of data on 11.5 million borrowers to improve website performance times, said James Runcie, the Education Department's federal student aid chief operating officer. Students who logged on during that window saw other students' personal details. Those who were exposed were notified and offered credit monitoring services. The department said it had no reason to believe any students' information was misused.

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Justin Pope covers hig%href--off(%)her education for The Associated Press. You can reach him at twitter.com/jnn--pope9. AP Education Writer Kimberly Hefling contributed to this report from Washington, D.C.