College Board Report on Student Aid: Federal Aid and Federal Loans Up , Private Loans Down

The College Board released their Trends in Student Aid 2010 today.  Here were their key findings:

• First to provide some context, here are the six top sources of student aid in 2009-10 representing over 90% of student aid (includes graduate and undergraduate aid sources which in total amounted to $199.2 billion for 2009-10):
  
  • Federal loans ($96.8 billion) or 49% of total aid
  • Institutional grants ($33.4 billion) or 17% of total aid
  • Pell grants ($28.2 billion) or 14% of total aid
  • Federal grants other than Pell ($13.1 billion) or 7% of total aid
  • Private and employer grants ($10.6 billion) or 5% of total aid
  • State grants ($8.7 billion) or 4% of total aid

• Focusing just on grant aid (excluding loans), here is how aid broke out by source (from College Board report):  "In 2009-10, 44% of all grant aid (and 49% of undergraduate grant aid) came from the federal government. Thirty-six percent of grant aid came from colleges and universities, 9% from state governments, and 11% from employers and other private sources."
  • Including loans, almost 3/4 of student aid comes from the federal government:  "In 2009-10, 74% of the total student aid for undergraduate and graduate students came from the federal government, an increase from 66% in 1999-2000 and 69% in 2004‑05."  Of course, while federal loans are subsidized with below-market interest rates, they are repaid by students. 

• Overall, the growth in federal, state, institutional and private aid used to finance postsecondary education expenses grew by 19% (or $31.7 billion in incremental spend) to $199.2 billion in 2009-10, representing the largest increase in over a decade (last year's increase in overall aid was 12%).  Here are how the five largest aid categories fared: 
  
  • Federal loans rose 14% to $96.8 billion in 2009-10 from $84.9 billion the previous year (see SLA post earlier this week for further analysis including breakouts by loan type)
  • Institutional grants (or awards by colleges) rose 12% in 2009-10 to $33.4 billion.   
  • Pell grants grew by 57.6% to $28.2 billion in 2009-10 driven by the increase in number of recipients and increases in the maximum grant size, although the College Board report is quick to note that only about 25% earned the maximum, "only about 25% of recipients currently qualify for the maximum. In 2009-10, when the maximum grant was $5,350, the average grant was $3,646 (See recent SLA post about growth in Pell grants)  
  • Federal grants (other than Pell) rose 79% to $13.1 billion for 2009-10.  This was principally due to the $5.4 billion increase in grants provided to veterans through the GI Bill.  
  • State grants to students rose 6% to $8.7 billion. 

• The only two programs that saw declines in the past year were Private and employer grants which fell 9.8% to $10.5 billion and Nonfederal loans which declined 22% to $8.5 billion.
  • See previous SLA analysis of private loan market here (2010-11 forecast to be released next week)

• I thought I would run some quick numbers on changes in aid since the Great Recession began.  Using 2006-07 as the base year, there has been almost a $60 billion increase in aid (includes federal, state, institutional and private aid and excludes non-federal loans) to assist students and families who have seen their incomes, their homes and their investments decline.  So, where has this aid come from?
  • Federal loans are up 49%:  $32 billion increase
    
  • Federal grants have risen 105%:  $21 billion increase due to increases in Pell ($14.6 billion) and Veterans ($6.0 billion)
  • Institutional grants rose 21%:  $6 billion increase
    • For those wondering about tuition discounting at private nonprofit four-year colleges and how that feeds into this figure, a 2010 College Board study "Tuition Discounting" found that in 2007-08, about a 1/4 of schools discounted less than 25% while at the other end of the spectrum, about a 1/4 discounted their tuition by 41% or more.  

• Regarding student debt levels, the College Board relies on institutional reporting of aggregate debt figures for these statistics:
  • Over the last decade, the percentage of students who graduate with debt has hovered between 52-55% at public 4-years and 63% to 66% at private four-years. 
  • In terms of average debt by school type: 
    
    • Average debt of degree recipients at public four-years (in 2008-09):  $19,800 per borrower
    • Average debt of degree recipients at private four-years (in 2008-09): $26,100 per borrower
  • Data for graduates at for-profits was not provided although College Board did analyze 2008 NPSAS data which found that 95% of independent bachelor degree recipients at for-profits borrowed on average $32,700.
  • Here is a post about the recent Project on Student Debt analysis of student debt levels. 
  • Average debt per graduate should increase significantly as upcoming graduates will have experienced a weak economy for a higher percentage of their college years and the resultant sharp increase in student loans (have risen almost 50% since the Great Recession).   

• The report provides a useful reminder to students and families of the tax benefits that they may be eligible for including:
  
  • Hope and Lifetime Learning Tax Credits were worth $5.3 billion to 5.2 million parents and students (about $1,000/parent/student)
  • Federal tuition and fee tax reduction reduced tax liabilities for 2.9 million taxpayers by $1.4 billion (about $500 per family). 
  • American Opportunity Credit provides a partially refundable tax credit for those taxpayers with no tax liability
  • Deduction for interest paid on student loans.  The report notes that "7.3 million taxpayers deducted $6.3 billion in student loan interest, generating over $1 billion in savings."
  • Excludability of tuition assistance from employers ($650 million)

Related articles:

• Tuition, Pell Grants Rise In Tandem (Wall Street Journal):  "College tuition and fees climbed once again this year, but the burden was tempered for some students and their families by a big jump in federal aid, according to a new report by the nonprofit College Board...In all sectors of higher education, tuition and fees have consistently risen more rapidly than the consumer price index, the data show. From 2000 to 2010, tuition and fees at public four-year colleges and universities rose an average of 5.6% a year adjusted for inflation..."The balance is shifting more toward the federal government," said Sandy Baum, co-author of the report. "If the federal government hadn't stepped in, we'd either see fewer students going to college or see them taking out bigger student loans."  On the subject of the government...

• College Cost Crunch Could Worsen As Feds Pull Back On Aid (Forbes):  "...“The silver lining is that record federal aid in the form of Pell Grants and tax credits is helping to make a college education more affordable,” College Board President Gaston Caperton said in a statement...There are, however, two big problems with this “silver lining”. First, families who don’t qualify for the grants and credits are still getting killed. Second, given the huge deficit and the likely change in the political tilt of Congress, federal aid won’t continue to grow and could well decline."
  • I expressed a similar sentiment this summer at a conference.  Namely that the level of government spending was not sustainable long-term and higher ed. couldn't rely on the $30 billion+ incremental spend in the out years. 

• Federal Grant Aid Jumps As College Prices Go Up Again (Chronicle of Higher Education):  "A big jump in federal grant aid is limiting the effect of tuition increases—at least for those students who qualify.  The federal government spent $41.3-billion on grant aid for undergraduate and graduate students in 2009-10, the most recent year for which data are available, according to one of two reports released Thursday by the College Board. That's up from $25.2-billion the year before, an increase of about 72 percent, or $16.1-billion in constant dollars...Of course, not everyone is eligible for aid meant for low-income students and military veterans, said Sandy Baum, an independent policy analyst for the College Board and an author of the reports. That suggests middle-income families may be feeling squeezed, she said."

• Tuition at Public Colleges Jumps 8%, College Board Reports (Christian Science Monitor):  "Tuition at public college and universities continued its steep upward climb this year, rising an average of nearly 8 percent at four-year institutions...  “You would like to think that schools were just quickly finding ways to cut costs without affecting educational quality, but that’s certainly not the case,” says Sandy Baum, an independent analyst for The College Board and co-author of its new report, "Trends in College Pricing 2010."  “We have to figure out a way to educate a lot more students in a cost-effective way without having either the states or the federal government or the families go broke, and that’s a long-term project.”

• College Tuition Costs Climbing Again This Fall (Associated Press):  "College tuition costs shot up again this fall, and students and their families are leaning more on the federal government to make higher education more affordable in tough economic times, according to two reports issued Thursday.  At public four-year schools, many of them ravaged by state budget cuts, average in-state tuition and fees this fall rose 7.9 percent, or $555, to $7,605, according to the College Board's "Trends in College Pricing." The average sticker price at private nonprofit colleges increased 4.5 percent, or $1,164, to $27,293.