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Financial aid rising faster than tuition

An annual survey of independent colleges, released Tuesday, finds that students may pay a little less to attend college this fall, even as colleges charge more.

Student aid spending will rise by 7 percent in the coming academic year, according to a survey by the National Association of Independent Colleges and Universities. Published tuition and fees will rise 4.5 percent.

Tuition inflation has slowed during the downturn: this is the second consecutive year of tuition increases in the 4-percent range. During the 10 years prior to the recession, sticker prices rose an average 6 percent a year.

But the average student actually spends a bit less now than before the recession, because of unusually large bumps in student aid budgets. Institutional aid rose 9 percent in the 2009-10 academic year.

"The bottom line for consumers is that they should not rule out a private college just because of the price tag," said David Warren, president of NAICU.

The interaction of published tuition and student aid is complicated. At many well-endowed, highly selective public and private schools, aid is awarded solely on need. Dozens of schools have published formulas that families can use to predict what a child from their household will actually pay, based on family wealth.

Less well-endowed schools beneath the top tier of selectivity typically use some combination of need and merit aid. Merit aid is generally meted out according to how badly the college wants the student and how dearly the student wants to attend the school. Such colleges effectively offer discounted tuition to coveted students. Discount rates are running higher than ever as colleges struggle to find the right price point to fill their class.

Aggressive discounting has spawned a new category of student who shops around among moderately selective schools to find the largest aid award. In some cases, discounting yields a total educational cost comparable to that of a public college.

"The economic downturn has accelerated efforts by private colleges to think and act creatively to enhance their affordability and remain competitive in the marketplace," Warren said.

Dozens of colleges have frozen tuition or tied annual increases to the inflation rate or have launched three-year degree programs, among other measures.

The survey, closely watched in the industry, generated results from 497 colleges. It asks colleges for percent increases, not dollar amounts.

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By Daniel de Vise  |  June 29, 2010; 12:41 PM ET
Categories:  Access , Admissions , Aid , Finance , Liberal Arts , Privates , Research  | Tags: NAICU survey, aid tuition college, college tuition, college tuition survey, net cost college, tuition and fees, tuition discounting  
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Mr. de Vise, I worry that this story needs additional critical analysis. Feel free to check out my extensive HuffPo comments. Here's the summary:

1. Does institutional financial aid count federal lending managed by institutions? If so, lending was expanded by the federal gov, not schools.
2. Students are poorer than pre-fin crisis and now more qualify for need based aid.
3. Tuition does not equal cost of attendance, which usually doubles to include room, board, books, so addressing tuition and aid as it relates to tuition is 50% of the needed discussion.

How much do you think this is industry response to "Chairman Harkin Announces HELP Oversight Hearings of Federal Education Dollars at For-Profit Colleges" ?

Posted by: AmeliaTimbers | June 29, 2010 11:03 PM | Report abuse

I'm not Mr. de Vise, but I'm glad to hazard an answer to those good questions from Amelia Timbers.

1. The NAICU survey excludes lending. It includes only grant aid.

2. This isn't really a question, but it seems intuitively correct. And Mr. Warren acknowledges as much when he says "the downturn has accelerated efforts..."

3. Tuition and fees are indeed just one part of the cost of attendance, but they represent about 60-70% of COA at private institutions, not 50%. And the College Board doesn't have standard definitions for room and board, although IPEDS does.

4. Because the NAICU study deals with financial aid awarded in 2009-10, it is impossible for private nonprofit colleges to have increased aid in response to the hearings on for-profit colleges.

Posted by: drrico | June 30, 2010 9:18 AM | Report abuse

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