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Pell Grant Funding Falls; Tuition and Fee Increases Less Than Last Year

November 1, 2006

The College Board’s recent reports on trends in college pricing and student aid show that the increases in average published tuition and fees outpaced inflation again this year—though the increase was smaller or the same compared to last year.  What college students and their families actually pay—net price—has also increased in 2006-07, but the growth rate in net prices has been slower than increases in the published price over the past 10 years. Student loans, particularly from private lenders, continued to outpace grants; and, for the first time in six years, Pell Grant funding—the biggest source of federal aid for low-income students—fell.

Average Published Tuition and Fees
Increases in average published tuition and fees were smaller or comparable to last year. However, two-year public institutions were the only sector to increase published prices at a rate only slightly above the rate of inflation.

  • At public four-year institutions, tuition and fee charges in 2006-07 average $344 more than in 2005-06 (6.3 percent increase); in 2005-06, published average tuition and fees increased 7.1 percent from the prior year.

  • At independent four-year institutions, tuition and fee charges in 2006-07 average $1,238 more than in 2005-06 (5.9 percent increase); published average tuition and fees increased at the same rate in 2005-06.

  • At public two-year institutions, tuition and fee charges in 2006-07 average $90 more than in 2005-06 (4.1 percent increase); in 2005-06, published average tuition and fees increased 5.4 percent from the prior year.

Though focus tends to be placed on higher priced institutions, in fact, 71 percent of full-time undergraduates in 2006-07 attended four-year institutions that charged less than $12,000, with 42 percent attending institutions that charged less than $6,000.  Only five percent of full-time undergraduates attended four-year institutions that charged $33,000 and more.


Pell Grants and Private Loans

Grant aid from all sources to undergraduate and graduate students increased by 89 percent from 1995-96 to 2005-06.  However, since 2001-02, the proportion of undergraduate funding in the form of grants has declined each year. This year, total Pell Grant expenditures and the average Pell Grant per recipient fell for the first time in six years.  Expenditures declined from $13.6 billion in 2004-05 to $12.7 billion in 2005-06, with the average award decreasing by $120. The maximum Pell Grant now covers one-third of the tuition, fees, room, and board at the average four-year college; five years ago, the Pell covered 42 percent, and 20 years ago, 60 percent. 

In contrast, half of the student aid used by both undergraduate and graduate students to finance their education is the form of federal loans, with undergraduate students borrowing $36.5 billion in 2005-06 through the unsubsidized and subsidized Stafford loan programs. Over the course of the decade, however, subsidized federal loans declined from 29 percent to 19 percent of total aid, while the private loan volume grew. Students are continuing to rely even more heavily on private loans to pay for college.  In 2005-06, private student loans totaled $17.3 billion, comprising 20 percent of all borrowing.  A decade ago, private loans made up only 5 percent of borrowing.


Net Price

The average net price—what students actually pay—is rising at public and independent four-year colleges, but declining at two-year public institutions.  For the purposes of these reports, net price is calculated as the average tuition and fee rate less average grant aid and tax benefits.

  • At public four-year institutions, the average net price paid by full-time students is about $2,700; grant aid and tax benefits cover approximately 53 percent of published tuition and fees and 24 percent of tuition, fee, room, and board charges.  Since 2002-03, the net price has risen more rapidly than published tuition and fees for this sector. 

  • At independent four-year institutions, the average net price paid by full-time students is about $13,200; grant aid and tax benefits cover approximately 40 percent of published tuition and fees and 30 percent of published tuition fee, room, and board charges. 

  • At public two-year institutions, the average net price paid by full-time students is about $100.  Over the decade, the average net price has actually declined in constant 2006 dollars from $700 to around $100. This decline can be partly attributed to California’s decision to decrease its published tuition for its two-year publics by 12 percent this year. Twenty-two percent of community college students are in California.


The College Board’s 2006 Trends in College Pricing, Trends in Student Aid, and Education Pays: Second Update are available to download for free.

Graphics used can be found in The College Board's 2006Trends in Student Aid  andTrends in College Pricing  reports.

For additional resources and studies on college pricing and financial aid, visit the NACUBO research Web pages.