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Higher Education Costs and Borrowing Trends Start to Stabilize

After years of skyrocking college costs, enrollment, federal aid, and student borrowing, new figures out Wednesday from the College Board reflect a more stable picture for higher education.

The average published price for attending a public, four-year college (in-state) went up just 4.8 percent this year, compared with an 8.3 percent spike reported the previous year. The average annual growth in the past decade was 5.2 percent. For 2012-13, the average tuition and fees amounted to $8,655, while room and board was $9,205, according to the College Board Advocacy & Policy Center's Trends in College Pricing 2012. Out-of-state students paid an average of $21,706 this year, up just 4.2 percent.

Total cost of attending a private, nonprofit college this year on average was $39,518—up 4.2 percent over 2011-12. And the average published price at a two-year public school was $3,131 in this year's report, which represented a 5.8 percent increase over the previous year.

For the first time in 20 years, total education borrowing, including federal and nonfederal student and parent loans, declined by 4 percent between 2011-12 compared with the previous year, the College Board's "Trends in Student Aid" 2012 reports. However, Sandy Baum, an independent policy analyst and co-author of the report, cautioned about reading too much into the finding.

"I wouldn't start saying we're on a downward trend. It's just one year," she said. "It doesn't turn the tide."

Over the past five years, borrowing increased by 24 percent to $113 billion in 2011-12, according to the College Board report. From 2001-02 to 2011-12, total borrowing for the average full-time student (undergraduate and graduate) increased by 55 percent in inflation-adjusted dollars.

The new report notes that just 2 percent of students who first enrolled in 2003-04 borrowed more than $50,000 from federal and nonfederal sources combined by 2009. Another 25 percent borrowed $10,000 or less, and over 40 percent didn't take out loans at all.

"Despite alarming headlines, most students are borrowing responsibly in reasonable amounts," said Megan McClean, director of federal policy for the National Association of Student Financial Aid Administrators.

Also, McClean emphasized the importance of students looking beyond the published sticker price to consider grants and aid that can bring the price of college down for most. The College Board report finds two-thirds of students receive some form of aid. Because of increased institutional and federal aid, the net tuition price at private nonprofit universities has actually dropped slightly over the past five years in inflation-adjusted dollars for many students.

Although the report doesn't have the data to explain the why behind the numbers, part of the explanation for a drop in borrowing could be linked to slightly lower college-enrollment figures, said Baum. The largest declines in enrollment were at for-profit schools, where tuition is typically higher and students borrow more. Still, overall college enrollment for full-time undergraduate students has grown by 45 percent from the fall of 2000 to the fall of 2010 (7.9 million to 11.4 million) and 27 percent for part-timers (5.2 million to 6.6 million).

The reduction in loans could also be connected to an improved economy, said Baum. With more money in their pockets, families may be borrowing less, or students can find jobs while attending school to reduce their debt levels. Family income also improved for those in the highest brackets, although not for lower-income families.

Government aid
Years of increased federal student aid, which has help offset rising tuition, is coming to a close, the College Board reports. Federal grant aid nearly doubled from $26 billion to $52 billion between 2008-09 and 2010-11, but declined to $49 billion in 2011-12.

Cuts in state appropriations to higher education continue to drive up the cost of college for students. In 2011-12, state money per full-time student at public institutions declined by 10 percent, marking the fourth year of deep reductions totaling 25 percent over the past five years.

At the same time, the percentage of state grant dollars for undergraduate students distributed without regard to their financial circumstances increased from 9 percent in 1985-86 to 29 percent points in 2010-11.

Molly Corbett Broad, president of the American Council on Education, a Washington-based organization representing presidents of colleges and universities, noted 80 percent of students are enrolled in public institutions and state budget cuts are the biggest factor in higher tuition.

"The good news is that tuition increases have moderated at both public and private colleges and universities, but the bad news is that tuition continues to outpace inflation and growth in family income," Broad said of the College Board report in a statement released today." All colleges and universities want to keep tuition affordable, and many have taken impressive steps to this end... But without adequate support from state governments, we are fighting an uphill battle."

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