College tuition is up sharply amid recession

With the economy struggling, parents and students dared to hope this year might offer a break from rising college costs. Instead, they got another sharp increase.

Average tuition at four-year public colleges in the U.S. climbed 6.5 percent, or $429, to $7,020 this fall as schools apologetically passed on much of their own financial problems, according to an annual report from the College Board, released Tuesday. At private colleges, tuition rose 4.4 percent, or $1,096, to $26,273.

"Every sector of the American economy is under stress and higher education is no exception," said Terry Hartle, senior vice president of the American Council on Education. "It's regrettable, and it's yet another piece of disappointing economic news that affects families."

The price increases came despite painful cost-cutting by colleges on everything from faculty to cafeterias and sports travel. And as usual, the rise in tuition outstripped the overall inflation rate.

In fact, during the period covered by the report, consumer prices declined 2.1 percent. So the latest tuition increase at public colleges was closer to 9 percent in real terms.

"It's only natural for parents to question why colleges are raising their prices yet again, while the rest of our economy is inflation-free," said James Boyle, president of the group College Parents of America.

The news isn't all bad. The estimated net price - what the average student actually pays after financial aid is taken into account - is still much lower than the list price, at about $1,620 at public four-year colleges, and under $12,000 at private ones. Both figures are up slightly from last year but still lower than five years ago.

Community colleges, home to about 40 percent of college students, raised prices, too, but tuition is still essentially free to many, after financial aid is factored in.

A companion report also out Tuesday shows financial aid from Uncle Sam is surging and reliance on often-expensive private loans has plummeted. And while students in states such as California, Florida and New York have seen double-digit tuition increases, some other states have held the line. Maryland and Missouri froze tuition.

Still, this year's increases were bad news for the estimated one-third of students who do not receive grant aid and must pay full price.

At Washington State University Vancouver, where students are facing consecutive 14 percent tuition increases, senior Peter Sterr said students are discovering that scholarships that once covered most or all of their bills don't go as far this year.

A political science major, Sterr wants to work in the public sector, but with $35,000 in loans, he isn't sure he will be able to afford to take such a job.

"Any liberal arts degree - political science, history, English, teaching - you're heading into an already depressed job market at base salaries that just don't pay enough," he said.

The College Board reports come as many colleges face their most challenging economic climate in generations.

State appropriations to public colleges declined nearly $4 billion in 2008-09 from the previous year, even as enrollment grew. Private colleges were forced to offer more financial aid even as their endowments fell by record amounts in the stock market meltdown and philanthropy dried up.

Worst hit is California, whose giant public university and community college systems educate about one in eight full-time college students in the U.S. Facing unprecedented state funding cuts, public colleges there have boosted fees, raised class sizes and furloughed faculty, but still can't balance their books. The University of California system is considering fee increases of more than 30 percent by next year.

In releasing its annual report, the not-for-profit College Board, which promotes college access and owns the SAT, tries to strike a balance. It tries to sound the alarm about rising prices without scaring students into thinking college is out of reach.

The group noted that financial aid makes tuition free for the typical low-income student at public colleges (though room and board expenses may remain).

And it pointed out the huge variations in what colleges charge - a quarter of four-year college students attend schools charging under $6,000, while about 9 percent attend schools charging more than $30,000.

The reports also offer a glimpse of what has become a significant expansion of the federal government's role in helping students pay for college.

In 2008-09, 65 percent of the $180 billion spent on student aid came via the federal government in the form of grants, loans and work-study programs, up from 58 percent the year before. Overall, the report estimated, federal grant aid rose almost 11 percent last year. That trend will probably continue because the maximum Pell Grant - the government's main college aid program for low-income students - rose by more than $600 this year to $5,350.

Meanwhile, students also borrowed more to pay for college - but much more from the government and much less from other lenders such as banks. After years of expansion, private borrowing collapsed from around $24 billion in 2007-08 to less than $12 billion last year, the aid report estimated.

College Board economist Sandy Baum called the shift to government borrowing good news, because federal loans generally have lower interest rates and more consumer protections.

On average, about two-thirds of bachelor's degree recipients borrow money, and their median debt is about $20,000 by graduation.