Student Loan Blog : inflation

After 86% Tuition Increase, Texas Senate Says “Enough Is Enough”

Student Loan Girl — Thu, 14 May 2009 19:09:00 GMT

The Texas Senate has voted to limit future tuition hikes, including a 5–percent yearly cap for the largest universities in the state, after seeing the state’s 35 public universities increase tuition and fees 86 percent since 2003, reports The Dallas Morning News (“Bill Limiting College Tuition and Fee Hikes Clears Texas Senate,” May 5, 2009).

Under the proposed law, all colleges and universities whose rates currently exceed the state’s median tuition and fee rate would either have to hold their tuition and fees at 5 percent or at the average rate of inflation, whichever figure is lower. If the bill becomes law, the new restrictions would apply to 17 state universities.

The bill will “make sure all Texans who seek the opportunities higher education can provide are not priced out of a world-class education,” said Lt. Gov. David Dewhurst.

Six years ago lawmakers handed over the control of setting tuition rates and fees to the governing boards of the state’s colleges and universities, a move that legislators have since regretted after seeing tuition jump so dramatically in such a short period of time, according to The Dallas Morning News.

Sen. Judith Zaffirini, the bill’s sponsor, drafted the legislation not only in the hopes of preventing similar tuition increases in the future, but also to remove the possibility of wiggle room for schools when setting their tuition and fees: the measure includes provisions that expressly prohibit schools from raising fees or levying any additional charges of any kind.

“There will be no more games played” by universities with tuition and fees, Zaffirini said, citing complaints from Texas families statewide.

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The New Financial Aid Landscape

Student Loan Girl — Sat, 26 Apr 2008 19:41:00 GMT

In the last few months, the media has been drawn to the potential student loan crisis, focusing on how students will be able to weather accessibility issues to get the funds they need for college next fall.

At the same time, many of the country’s top colleges and universities have been revamping their financial aid programs to better assist parents and students in covering their college costs.

Schools Modifying Financial Aid Programs

To date, about 50 schools have made substantial changes to their financial aid programs, writes Anne Marie Chaker of The Wall Street Journal (“The New Math of College Financing,” April 21, 2008).

Several schools have chosen to replace student loans with grant money that won’t need to be repaid, effectively lowering their tuition. Others have waived tuition costs altogether for families that fall below a specific income. Some have capped the amount of money a family is required to contribute toward college costs at a certain percentage of the family’s yearly income.

Student Loans Being Replaced with Grants

Undergraduates attending Stanford, Dartmouth, Harvard, M.I.T., Yale, or Cornell next fall now have a better chance of graduating with less debt from student loans, thanks to a significant shift in the financial aid programs at these schools.

Under pressure from Congress, with legislators questioning growing student debt levels and skyrocketing tuition costs that outpace inflation even as the wealthiest schools report endowments of $500 million or more, colleges and universities with sizeable endowments are tapping into those endowments to replace student loans with grants in their financial aid awards.

Although Harvard is using grant awards to eliminate student loans from its financial aid packages entirely, other schools are reserving these loan-replacement grants for families at qualifying income levels, Chaker notes.

Cornell, for example, in the 2009–10 academic year, will only replace student loans with grants for families making less than $75,000 annually. (The threshold was $60,000 for the current school year.) Students from families earning between $75,000 and $120,000 a year may still be awarded student loans, but those loans will be capped at $3,000 for 2009–10.

Tuition Waivers for Middle-Income Families

A handful of the nation’s top schools have also implemented programs that eliminate tuition charges completely for middle-income and even upper-middle-income families, with qualifying income levels as high as $100,000.

At M.I.T. and Dartmouth, families who make less than $75,000 a year will be able to send their children to college at zero tuition cost (although they may still have to cover room and board, books, and other living expenses). At Stanford, the income cutoff for a tuition waiver is $100,000 (with assets typical for that income level).

Family Contribution Capped Even for $100K+ Incomes

Last year, Harvard announced “one of the most ambitious [financial aid] plans out there,” writes Chaker, allowing families earning between $120,000 and $180,000 a year, with standard corresponding assets, to put just 10 percent of their annual income toward their child’s cost to attend — in other words, paying only between $12,000 and $18,000 of the 2008-09 sticker price of roughly $50,000.

Yale followed on Harvard’s heels with its own 10-percent policy that went even further up the income bracket, applying to families who make up to $200,000 a year.

As part of these new financial aid plans, both Yale and Harvard require that students contribute between $2,500 and $4,000 of their own funds, earned through a part-time or summer job or both, in addition to their parents’ 10-percent contribution.

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Congress Joins States and Colleges in Efforts to Reduce Soaring Textbook Costs

Student Loan Girl — Mon, 03 Mar 2008 07:09:00 GMT

With the average college student now shelling out between $900 and $1,000 each year for textbooks and supplies, according to the College Board’s latest Trends in College Pricing report, schools, states, and now Congress are getting involved in the crusade to control the spiraling costs of college textbooks.

Propelled by studies that show the prices of textbooks are rising faster than the rate of inflation, the House of Representatives included provisions in the recently approved College Opportunity and Affordability Act that are specifically targeted at making textbook costs more manageable, reports Elia Powers of Inside Higher Ed (“Different Tacks on Textbook Choice,” Feb. 19, 2008).

The House bill (H.R. 4137), which passed the House on February 7 and renews the Higher Education Act, would have colleges provide advance information in their course schedules about required books to give students time to plan for expenses and comparison-shop for the most cost-effective options.

Also approved by the House was an amendment (H.AMDT.951) proposed by Rep. Tim Ryan of Ohio that would create a pilot competitive grant program to assist a select number of colleges in setting up textbook rental programs.

States Enacting Their Own Textbook Legislation

H.R. 4137 would also require textbook publishers to provide more information about pricing and changes from previous editions, which follows bills already passed by some state legislatures, writes Powers.

Last April, for example, Washington state House Bill 2300 was signed into law, requiring textbook publishers to disclose retail prices and a history of revisions from edition to edition when presenting any materials to faculty.

In June, Oregon passed its similar Senate Bill 365 into law. In addition to charging publishers with providing retail prices and a list of all previous versions of a text to potential adopters, the Oregon measure requires publishers of textbook “bundles” (textbooks packaged with an accompanying CD-ROM or study guide, for instance) to make each component of the bundle available to students separately and to disclose the retail price of each piece.

In California, Assembly Bill 1548, known as the College Textbook Transparency Act, likewise calls for publishers to provide a list of revisions made to new editions, as well as for college bookstores to release the wholesale prices of textbooks. The California bill was signed by Gov. Arnold Schwarzenegger in October and goes into effect in 2010.

Changes at the College Level

In response to the increasingly vocal concerns of students, families, and legislators, not all schools are waiting on Congress or state officials to adopt changes to textbook pricing and marketing practices. Some schools, writes Powers, have already instituted book rental, buyback, or other programs in a move to extend textbook affordability.

At Rio Salado College in Arizona, for example, a partnership with Pearson Custom Publishing allows professors to “build” custom textbooks, drawing material from multiple sources. Administrators believe this program could save students up to 50 percent on reading materials.

The University of Virginia, in addition to expanding its textbook rental and guaranteed buyback programs, is increasing its selection of e-books, which can save students as much as 30 percent over print versions of new editions. And a growing number of U.Va. professors are choosing to purchase older editions of books in cases where the new material isn’t a necessity, a move the university says cuts an average of 75 percent off new book prices.

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Student Loan Debt Is on the Rise, and College Grads Face Growing Financial Obstacles

Student Loan Girl — Sun, 04 Nov 2007 20:10:00 GMT

Money. Some of us have it. Some of us need more of it. Particularly recent college grads transitioning from their campus to the workspace, from having student loans available that help pay their living expenses to having to make it on their own—all while paying back those student loans that paved their way to graduation.

With the surge in student loan debt outpacing the growth in starting salaries, and with tuition increases far exceeding increases in federal financial aid, a growing number of college graduates are facing barely manageable levels of student loan debt.

Tuition Hikes Outstrip Increases in Federal Financial Aid Awards

“Student aid continues to grow, but not as fast as tuition, and not enough to make up for the difference between family incomes and the price of college,” says Larry Abramson in a story for National Public Radio (“Tuition Hikes Outpace Student-Aid Increases,” Oct. 26, 2007).

According to the College Board’s “Trends in College Pricing” 2007 report, average published tuition and fees for in-state college students at four-year schools climbed by 6.6% for the 2007–08 academic year, a hike that “outpaced increases in the financial aid that lowers what most students actually pay” writes Erica Perez in the Milwaukee Journal Sentinel (“College Costs Outpace Inflation,” Oct. 23, 2007).

Starting Salaries Increasing More Slowly Than Student Debt

With more tuition to have to pay, students are graduating with more student loan debt than ever. In 2004, two-thirds of college graduates left school with student loans, and between 1993 and 2004, the average debt for college graduates with student loans soared a staggering 107%, according to a report by Luke Swarthout, a Higher Education Associate for the U.S. PIRG Education Fund. Student loan debt, Swarthout notes, is rising faster than both the cost of living and the cost of health care (“Student Debt and Consumer Costs in the Minneapolis–St. Paul Area,” July 2006).

Student debt levels are also eclipsing income gains. The “rapid rise in student debt comes while the real median income of younger Americans has only modestly increased” by 4.4% between 1995 and 2004 for household earners under 35, writes Swarthout.

Starting salaries for recent graduates can’t keep pace either. A report on “Student Debt and the Class of 2006” released by the Project on Student Debt found that for graduating seniors, average student loan debt rose 8 percent between 2005 and 2006, while starting salary offers rose only about 4 percent.

“Too many young people leave college saddled with heavy debt burdens and struggle to cover their loan payments on top of basic living expenses,” says Robert Shireman, Executive Director of the Project on Student Debt, in a press release for their recent study. “Students need better options and counseling when they’re deciding how to pay for college.”

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