Bigger Tuition Bills and Student Loans Coming in 2011

Some of the nation’s wealthiest and most generous colleges are asking their students to earn and borrow more to pay for college.

Of the more than 2,600 four-year colleges in the country, fewer than 70 are committing this year to meet the full financial need of every student using only grants and reasonable amounts of student work and federal debt.

And several of those are now saying that while they plan to increase the dollars they hand out in scholarships every year, they can’t afford to increase their aid budget fast enough to keep up with rising prices and the growing number of students who don’t have enough family savings to pay price tags that, in some cases, will probably be $50,000 plus next year. As a result, many colleges will ask some freshmen to shoulder a larger share of their college bills.

The outlook for aid isn’t completely bleak, however: The Obama administration plans to increase federal Pell grants by about $200 per student in fall 2010. Many students, especially those with excellent grades, often get more aid than the government calculates they need, according to research by Postsecondary Education Opportunity, an Iowa-based think tank. And a few schools, such as Franklin and Marshall College in Lancaster, Pa., have been shifting money from merit aid budgets in an effort to make sure more needy students get sufficient aid.

But many colleges say they can’t keep up with skyrocketing demand for aid.

Beloit College in Wisconsin, which met 100 percent of students’ needs in previous years, says that because of the troubled economy, last year it could afford to meet the full need of only 96 percent of its 1,400 undergraduates. Spokeswoman Susan Kasten says that the school still tries to provide as much aid as possible but can’t predict or guarantee its ability to meet all students’ needs in the future.

Principia College in Elsah, Ill., last year changed its policy to stop guaranteeing to meet the financial needs of every admitted student, says Brian McCauley, dean of enrollment management. The school still meets more than 90 percent of students’ financial needs, but it is trying to raise extra tuition revenue to improve the campus and services, he said.

These schools join the more than 97 percent of the nation’s four-year colleges already saying they cannot afford to make sure that every student’s parents will have to pay only the expected family contribution, which is calculated by the federal government based on the family’s Free Application for Federal Student Aid. Typically, schools reserve their biggest scholarships for students with top grades or other special talents, so that only the best-qualified students get full aid. Some top students even get extra aid to help cover the family contribution.

The aid gaps have been putting strains on the budgets of middling students. The typical student from a family earning less than $73,000 got about $3,000 less aid than the government calculated the family needed in 2008, the latest year for which statistics are available, according to Postsecondary Education Opportunity. Many colleges use parent loans, such as federal PLUS loans, to bridge such gaps. Including PLUS loans in a student’s aid offer is a controversial practice because PLUS loans are expensive (with fees, the interest rate of some exceeds 9 percent) and are not available to parents with bad credit.

The colleges that commit to meeting the full needs of their students usually calculate their own EFC based on the more in-depth financial aid application developed by the College Board, and so they may provide less aid to certain families in the belief that the family can afford more than the federal government has determined. (However, the alternative calculations also mean many families get more aid than the federal government suggests.) Whichever way it is calculated, though, many parents find they can’t afford their EFC, and so they must use PLUS or other loans to cover their contribution.

Even among the handful of colleges with big and growing aid budgets, some schools say they have no choice but to ask parents and students to contribute more and—if necessary—borrow more.

The University of North Carolina, for example, says it has boosted its aid packages to include the cost of student health insurance. To meet these higher costs, UNC will ask some students to take on slightly more student debt. Shirley Ort, who heads UNC’s financial aid office, says that she can still afford to offer students from families with very low incomes enough grants to avoid any student loans. To rein in the increase somewhat, she expects to ratchet the percentage of need met with grants down from 72 to 65 percent for students who have higher incomes but still qualify as "needy." Because UNC’s tuition is only about $6,000, the difference will typically be just a few hundred dollars, which can be borrowed using low-cost federal Perkins or Stafford loans.

Ort says that given the economy, maintaining the promise to meet all students’ needs with such a small increase in student debt is something of a victory.

Connecticut College in New London, which had typically included a few thousand dollars of federal student loans in standard aid packages for all but low-income students, said it plans to increase the size of loan and earnings expectations for many future students as well.

Dartmouth and Williams early this year announced that starting with the class of 2015, they could no longer guarantee that students who qualified for aid wouldn’t have to take out modest federal student loans. Both schools said they would provide enough aid so that low-income students, at least, would not have to borrow. That leaves only about a dozen colleges in the country promising that all students who qualify for need-based aid will get enough scholarships to avoid having to borrow. Here’s a list of the schools with no-student-loan promises.

If the economy, family incomes, and government budgets don’t recover soon, other colleges may cut back on their generosity as well. Adrian College, like all Michigan colleges, has been hit hard by the elimination of that state’s "Promise" scholarship. So far, Andrew Spohn, director of financial aid, has been able to find school money to make up for the loss of the state aid for all students who apply on time. Spohn can no longer afford to give big grants to those who apply late, however. And students admitted from the wait list and from overseas will most likely get less aid than they qualify for. "We strive to meet the need of all our students the best we can," he says, but with the state’s unemployment rate topping 14 percent, cuts to scholarship budgets, declining donations to colleges, and continued turmoil in the investment markets, finding additional cash to meet students’ growing needs "could be difficult."

(US News & World Report)

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