College Tuition: Going for Broke

A College Board report paints a grim picture: Tuition is rising while incomes are flat—and there's very little schools can do about it

By Alison Damast

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Cash-strapped families were dealt another blow this fall as tuition at public and private colleges for the 2009-10 academic year continued to outpace inflation, the College Board said in a report released on Oct. 20.

This year's College Board report shows average increases of 6.5% for public in-state tuition and 4.4% for private colleges. The consumer price index declined 2.1% between July 2008 and 2009, meaning that inflation-adjusted increases in prices this year are significantly larger than current dollar increases, the College Board says. At the same time, family net income has barely budged over the past decade, says Sandy Baum, a senior policy analyst with the College Board.

"The struggle of families to pay for college is largely attributed to rising prices, but also to the fact that incomes are simply stagnating," Baum says. "Families are facing these prices with incomes that are not making any progress at all,"

The spiraling cost of higher education comes at a time when institutions are reeling from the aftershocks of shrinking state aid, battered endowments, and significant budgetary pressures. Schools managed to temper some of these increases by doling out more institutional aid and grants to students, a move that made the sticker price less painful for the 18.5 million students projected to attend college this year. Last year, about two-thirds of full-time undergraduates received grants, with students receiving on average $5,041 in grant aid, up from $4,656 the year before, the report says.

Tuition hikes: the main budget option

That aid barely softened the blow for some students, especially those attending public schools, where for the second consecutive year tuition and fees rose faster than those of private schools. In such states as California, Washington, Florida, and New York, public schools raised tuition by more than 15%, he says. Other states, like Maryland, were able to keep tuition at steady levels.

"Once you get past budget cuts such as program reduction, layoffs and furloughs—the order of the day at just about every institution—you're really only left with tuition, " says Terry Hartle, a senior vice-president of the American Council on Education. "That is acting as a fiscal balance wheel at many institutions, making up the difference between lost revenue from other sources and the funding they can't come up with."

The average annual in-state tuition and fees at four-year public colleges for the 2009-10 academic year is $7,020, up $229 from last year. Those numbers don't include room and board, which adds another $8,193.

"This is certainly higher than most of us like to see, but is lower than we might have feared, given the current state of the economy and what we experienced in past recessions," Baum says, noting that in past recessions the average price increase for public colleges was sometimes in double digits.

accelerating prices at public schools

This year's 6.5% tuition increase for public colleges is almost identical to last year's increase (6.4%), but it's particularly worrisome because of the long-term trend, Baum says. From 1979 to 1989, the price of attending a public four-year institution went up in inflation-adjusted dollars at an annual rate of 3%, increasing to 4% from 1990 to 2000—and, for the most recent decade, nearing 5%.

"At public four-year colleges, we've seen a rapid rate of increase in prices and that trend has been exacerbated in recent years," Baum says.

That's the exact opposite of what has been happening over the long-term at private colleges, which have seen dips in the rate of increase of published prices. For example, the annual inflation-adjusted cost of attending a private school in the last decade has gone up just 2.6% a year, a decline from the 1980s, when the average price increase stood at 4.7%, the report says.

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