It was a good day to be a smallmouth bass. After seven hours, all but one of the students participating in Unity's first annual "Fishing for Scholarships" paddled back empty-handed. Mike Bradford, a sophomore from Bear, Del., reeled in a $50 tuition coupon and a free sea-kayaking trip donated by a local merchant. Nice, but it hardly covers those hefty college bills.
A lot of families these days feel as if they're facing college costs without enough funds on the line. Salaries are flat, jobs are scarce, investments haven't fully recovered, and savings are tapped out. Financial aid can't seem to keep pace with financial need, and now the Department of Education has tinkered with the financial aid formula to some families' detriment [story, Page 54]. Tuition, particularly at state schools, continues to rise. Families aren't alone in their anxiety: Colleges, too, wonder how they will pay the bills, with endowments down 6 percent last year, the biggest drop since 1974, and 25 states cutting higher education appropriations by as much as 14 percent. Many schools have had to cut classes and sports teams, freeze salaries, and lay off employees to deal with the budget shortfalls.
Yes, it looks like a crisis. But before you despair, listen to this: It's still possible to get help paying for college. There's more financial aid money available today than ever before, and more students are getting a piece of it. But the piece is smaller, and it might be in the form of an IOU. It all adds up to a substantial shift in who ends up footing a big chunk of the bill for college: you. "Students and their families are paying more of the share than they did a decade ago," says Donald Heller, senior research associate at the Center for the Study of Higher Education at Penn State.
Financial aid was originally designed, of course, to make college affordable for everyone. In 1965, Lyndon B. Johnson signed the Higher Education Act, which gave colleges government grants to distribute to needy students and established a loan program for the middle class. Seven years later came the debut of the Pell grant, the primary funding mechanism for low-income students. In its early years, the Pell--with a maximum award of $452 based on family income--covered as much as 84 percent of college costs. But while federal spending on Pell grants has gone up 8 percent since 1991, tuition and fees have increased by 38 percent. The Pell's current maximum of $4,050 covers roughly 39 percent of the average cost of tuition and room and board. And with the White House and Congress eager to limit spending, it's unlikely that the Pell will be raised this year.
It sounds like a pretty good deal. But more loans mean more students (who are today outborrowing their parents) are paying the bulk of their college costs. "The student aid system was based on the parental responsibility to pay for college," says Brian Fitzgerald, staff director of the Department of Education's Advisory Committee on Student Financial Assistance. "Loans mean it's the actual student who is bearing the burden." Nationwide, student debt is up 66 percent since 1997.
Take Erin Brindell, a 21-year-old from St. Louis. In April, her father, an accountant, took early retirement rather than risk losing his job. Her mother, a teacher who'd been fighting cancer, also retired. With Brindell's family income down almost 60 percent from last year, and two other siblings in college (another four have already graduated), the senior asked her school, a private university in Missouri, for more aid. The college said it was out of money and pointed her to a state loan agency. She borrowed $9,700, bringing the grand total of her debt upon graduation next spring to $60,000. Brindell, who is majoring in secondary education, will end up paying for what her family could not, which promises to be a struggle on a teacher's salary.
Deep debt. This fall, Congress will consider raising the Stafford loan cap during the reauthorization of the Higher Education Act. The combination of low interest rates and a higher limit, some education experts argue, will help more students pay for college without resorting to private loans, which generally have higher interest rates and require quicker repayment. But critics respond that the debt load is already too high and looms darkly over students' futures, forcing them to consider majors--and careers--based on potential earnings rather than academic inclination. Some experts suspect a higher loan limit would not translate into more aid: Institutions will just reduce grant aid by the extra amount students can borrow.
At the same time that federal policy is influencing the growth of loans at the expense of grants, states are driving up public university prices and accelerating the cost shift to students. State support for universities has been steadily declining over the past two decades. Legislators see that colleges have sources of funds like tuition and private donations that other pressing budgetary needs like primary education and healthcare do not. And the recent fiscal crises have just exacerbated the decline. This year was the third in a row of drastic cuts to university funding nationwide. The Maryland university system lost 14 percent of its budget, while California lost $700 million of the $9 billion it usually spends on higher education. Experts predict an additional 2.3 percent decline next year. And remember this all comes at a time when many states expect higher enrollments. Nevada, for example, is bracing for a 33 percent boom in high school graduates by 2007.
Some states, like Arizona, have tried to shield the neediest students. "We ran the numbers to see how we can increase tuition and set aside enough to hold the most needy harmless," says Jack Jewett, former president of the state's board of regents, who notes that 14 percent of all tuition revenue will be funneled into financial aid.
But many states are coming up short. Indiana managed to boost spending but not enough to cover higher tuition, so it will now have to limit the amount of the awards. And Minnesota couldn't give out any grants to new college students last spring, despite an extra $8 million in the budget, because current students had already consumed the available money. "I think that policymakers are siding with aid programs more than institutions in terms of cuts," says Kristin Conklin, a senior policy analyst with the National Governors Association, "but that relative protection is not translating into more buying power for students."
Individual universities are exhausting their financial aid dollars as well. Take Penn State: While it raised tuition 9.8 percent to about $9,500 for incoming freshmen, it has lost $45 million in state funding over the past two years. "Something would have to be traded off, like competitive wages for faculty or forgoing already delayed maintenance on buildings," says Anna Griswold, an assistant vice provost.
But there may be another significant reason why there's not enough money to go around. Some critics say that too much is being spent on merit aid. Over the past decade, state grants have gone up 447 percent, but much of that is not need-based. Since 1993, the Georgia HOPE Scholarship, the granddaddy of all the state scholarship programs, has doled out more than $1.9 billion to more than 693,000 students with B averages or better in high school. But programs like Georgia's tend to favor middle- and upper-class students whose families probably could afford college without a scholarship. And with several states funding the merit programs through lotteries, a 2002 study by the Civil Rights Project at Harvard University argues that lottery players, who are "disproportionately low income, poorly educated, and black," are paying for the college education of these better-off kids. The study found that 12 states with merit programs gave out nearly three times as much money for those scholarships as they did for need-based aid.
Looking up. Yet there are bright spots on the horizon. Institutional aid from private universities rose almost 197 percent in the past decade. Schools with generous endowments can purposely keep loans to a minimum. "A one-year downturn doesn't necessarily severely impact our ability to maintain our [financial aid] policies," says Joseph Russo, director of financial aid at Notre Dame. And a group of wealthy schools (called the "568 Group" for a section of federal law that allows them to collaborate) are giving out more grant aid this year, having decided to cap home equity at 2.4 times a family's income in its eligibility test. (The federal government does not count home equity when assessing need.) So, those families whose home prices shot up while their salaries stagnated will find themselves with better aid offers.
Even Erin Brindell, with her $60,000 debt, isn't gloomy. "I can't worry too much," she says. "I've had a great college experience."
Open your wallet
Average tuition and fees at colleges and universities.
[Complete chart data are not available.]
Private four-year 2003 $18,273
Public four-year 2003 $ 4,081
Note: In 2002 dollars.
Source: College Board
Scott Greenway--USN&WR