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The Cost of College Continues to Increase While Average Pell Grant Decreases


October 25, 2006
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A college education is more necessary than ever for Americans to compete in the competitive global marketplace, improve their station in life, and contribute to their communities and the nation.  But a new College Board report, released yesterday, finds that the cost of college is continuing to increase while the average federal Pell Grant award declined for the first time in six years.  College affordability has not been a priority of the Bush Administration or the Republican-controlled Congress.  More must be done to ensure that no student is denied a college education because of his or her family’s financial resources. 

 

The cost of attending college continues to rise faster than inflation.  The College Board report found that tuition, fees, room, and board costs increased by $681 at public four-year universities and by $1,624 at private four-year universities during the 2006-2007 school year.  While this year’s increase is similar to last year’s, the cost of attending college has risen substantially over the past six years.

 

  • The cost of tuition, fees, room, and board at public four-year universities has increased 52 percent, from $8,439 in 2000-2001 to $12,796 in 2006-2007 (in current dollars); and

 

  • The cost of tuition, fees, room, and board at private four-year universities has increased 37 percent, from $22,240 in 2000-2001 to $30,367 in 2006-2007 (in current dollars).

 

Despite rising college costs, federal Pell Grants actually declined.  Student aid can help cover some of the cost of attending college, but this aid is not keeping pace with rising costs.  The College Board found that, not only did the average Pell Grant fail to keep pace with the rising cost of college, the average Pell Grant award actually decreased by $120 per person during the 2005-2006 school year.  This is the first decrease in the average Pell Grant award in six years, when the average Pell Grant decreased by $25 in 1999-2000.

  • Total expenditures on Pell Grants decreased from $13.6 billion in 2004-2005 to $12.7 billion in 2005-2006;

 

  • The average Pell Grant per recipient decreased from $2,474 in 2004-2005 to $2,354 in 2005-2006; and

 

  • The maximum Pell Grant ($4,050) will cover only 33 percent of the cost of tuition, fees, room, and board at the average public four-year university in 2005-2006.

 

Students and parents are having to borrow more than ever before.  Without adequate federal grants, students and their parents must rely more on student loans to finance their college educations.  More than 60 percent of undergraduates at four-year colleges have to take out loans, and the average amount of federal student loan debt upon graduation has increased from approximately $7,650 in 1992-1993 to $17,400 in 2003-2004.  When private loans are factored in as well, average student loan debt in 2003-2004 was more than $19,000. (National Postsecondary Student Aid Study 1993 and 2004, National Center for Education Statistics)

 

  • Even with student loans and work-study programs, students can be confronted with thousands of dollars of unmet financial need that they simply cannot afford to pay.  Each year, more than 400,000 low- and moderate-income high school graduates who are fully prepared to attend a four-year college do not do so because of financial barriers.  About 170,000 of these students will attend no college at all. (Advisory Committee on Student Financial Assistance, June 2002)

 

  • Student debt can deter some graduates from pursuing public service careers such as teaching and social work.  Pursuing these modestly paid but essential careers would leave some graduates with an unmanageable level of student debt. (State PIRGs’ Higher Education Project, April 2006)  The most recent National Student Loan Survey found for the first time that the probability of owning a home decreases as student debt levels increase. (Nellie Mae Corporation, February 2003)

 

Republicans have failed to make college more affordable.  As the cost of college and the burden of student debt have increased, Republicans have done little to ensure that financial considerations are not preventing qualified students from attaining a college degree.  The situation has grown worse, and presidential campaign promises remain unfulfilled.

 

  • Failed to extend a popular tuition deduction.  Republicans have failed to extend a $4,000 tax deduction for tuition expenses, which expired at the end of 2005.  Republicans have had other priorities.  The tuition tax deduction was stripped from a Senate-passed tax reconciliation bill and replaced with capital gains and dividends tax breaks.  The tuition tax deduction was then supposed to be attached to a bipartisan pension bill that was ready to be enacted.  But once again Republicans stripped the tax deduction from the bill, preventing it from being extended.  Now Republicans are holding the tuition deduction hostage to their efforts to reduce the estate tax, which is paid by only America’s wealthiest families.

 

  • Failed to provide promised Pell Grant increase.  President Bush still has not followed through on his six-year-old campaign promise to increase the maximum Pell Grant to $5,100.  His latest budget proposal would keep the maximum Pell Grant at $4,050.  At the end of 2005, Congress had an opportunity to address the rising cost of attending college by reducing excessive subsidies going to student loan lenders and using those savings to substantially increase need-based aid to all students eligible for Pell Grants.  But Republicans had other priorities:  cutting $12 billion from the student loan program and using it to offset tax breaks that primarily benefit the wealthy.  Only a very small amount of additional savings from the budget reconciliation bill went to student aid, and only a small subset of Pell-eligible students are eligible for this additional aid.  Republicans also increased interest rates for PLUS loans to parents from the previously scheduled fixed rate of 7.9 percent to 8.5 percent.

 

  • Implemented changes to the financial aid formula that reduced assistance to students.  In December 2004, the Bush Administration implemented a change in how state taxes are treated when determining eligibility for federal financial aid.  A Government Accountability Office (GAO) analysis estimated that: the formula change would force a majority of families (61 percent) to contribute more to tuition costs for the 2005-2006 school year; about 35 percent of students would have their Pell Grants decreased; and an additional 81,000 students would lose their eligibility for Pell Grants. (GAO, March 22, 2005)

 

Democrats are offering a new direction that will make college affordable.  Democrats recognize that students and their families are struggling to cover the rising cost of college and have made college affordability a top priority.  Democrats are committed to:

 

  • Cutting student loan costs and making payments manageable.  Interest rates for new Stafford loans increased to a fixed 6.8 percent in July.  Democrats support efforts to make student loans affordable, such as lowering interest rates.

 

  • Expanding Pell Grants.  Democrats recognize that Pell Grants have not kept pace with the rising cost of college and are committed to raising the maximum Pell Grant award to $5,100.

 

  • Providing a permanent tax deduction for college tuition.  While the Republican-controlled Congress allowed the tax deduction for tuition costs to expire, Democrats support making college tuition deductible from taxes, permanently.