Student loans

How student loans, tuition fees and grants have changed over time


Washington
CNN

The cost of a college education isn’t skyrocketing — at least not yet, considering the average amount of scholarships students receive.

Most schools offer grants, money that students don’t have to pay back, which makes the actual amount they pay for college, known as the “net cost,” lower than the price. displayed published.

A combination of factors — including an increase in grants, the pandemic-related tuition freeze and soaring inflation — means the average net cost has fallen over the past six years.

The average net cost for one year at a public four-year college is $3,090 lower than it was in the 2016-17 school year after adjusting for inflation, according to The College Board’s. last report on college prices and student aid.

After peaking at $22,340 in the 2016-17 school year, the average net cost of attending four-year public schools has fallen to $19,250 for the current school year, in 2022 dollars.

This is the lowest average annual net cost since the 2006-2007 school year.

Private, non-profit four-year colleges tend to be more expensive than four-year public schools, but the average cost of private schools schools is also in decline. The average net cost of attending private schools is currently $32,800.

An important factor is that many schools have frozen tuition fees during the Covid-19 pandemic. Some schools haven’t increased the cost because classes have moved online, and others may have lowered it to attract students as enrollment dwindled, said senior policy researcher Jennifer Ma. at the College Board and co-author of the annual “Trends in Report on College Pricing and Student Aid”.

Another reason why the net cost of college has gone down is that the amount of scholarships students receive from their schools and the government has gone up. This increase predates the pandemic.

Overall, the current average financial aid per student in a four-year public college, at $8,690, is nearly $4,000 higher. than it was in the 2006-2007 school year, after adjusting for inflation.

The increase in grants is largely due to school grants, Ma said. Total federal grants fell 32% in inflation-adjusted dollars between 2011-12 and 2021-22.

A third reason why college costs less, relatively speaking, is because the cost of everything else has risen even faster, up 7.7% over the past year.

The fact that college is cheaper than it used to be may surprise many Americans, especially those for whom an education is out of reach without going into debt.

Pell Grants, a major federal student aid program for low-income families, cover a smaller share of the cost of a college education. This means that students who need the money the most may be paying more for their degrees if the difference is not made up by grants from other places.

At its peak in the 1970s, the maximum Pell Grant covered almost 80% of the average cost of tuition, fees, room and board. Now, the maximum Pell Grant – worth $6,895 – covers just 30% of the average annual cost, according to a CNN analysis of College Board and Department of Education data.

About 6.1 million students received a Pell grant last year.

Pell grants are solely based on financial need, which is determined based on the student’s family income, family size, number of family members enrolled in college, and cost of attendance. Not all recipients receive the full amount. The value of the subsidy decreases for families with lower estimated needs. Unlike loans, the Pell Grant does not have to be repaid.

The majority of Pell Grant recipients had a household income below $40,000 in the 2019-2020 award year, the latest data available.

Earlier this year, Congress passed a significant $400 increase to the Pell Grant — but still fell short of Biden’s campaign pledge to double the value.

If Biden is unique student debt cancellation plan is cleared by the courts to proceed, Pell Grant recipients will be eligible until $20,000 in debt relief – up from the $10,000 in relief other eligible borrowers can receive.

While the amount of outstanding student debt exceeded $1.6 trillion, overall college borrowing declined for the 11th straight year in the 2021-2022 academic year, according to The College Board.

This may mean good news for some families, but there are some nuances when looking at the type of loan borrowed over time, Ma warned.

Although annual federal undergraduate loan borrowing has has remained fairly stable over the past 15 years, the amount of money borrowed by parents and graduate students from the federal PLUS loan program has steadily increased, even after adjusting for inflation.

PLUS loans carry a higher interest rate, currently set at 7.54%, and are generally borrowed after a student has exhausted the amount of subsidized and unsubsidized loans a borrower is eligible for.

PLUS loan limits are less restrictive. Generally, a parent or graduate student can borrow up to the amount of tuition minus any other financial aid received.

If the cost of participation increases, a larger PLUS loan can be borrowed.

According to New York Federal Reserve.

As a proportion of US household debt, student debt steadily increased between 2004 and 2021, rising from just over 3% to 10.8%, before falling back to 9.5% in July 2022.

At around $1.6 trillion, overall student loan debt remains well below the more than $11 trillion Americans owe in mortgage debt.

Since the start of the pandemic, households’ share of student debt has fallen, in part because growth in mortgage debt has exceeded student debt growth since the start of the pandemic. Additionally, growth in student loan balances has slowed, largely because college enrollment has declined and interest on federal student loans has been frozen since March 2020, thanks to a pandemic-related pause, according to researchers at the New York Fed.

It’s worth nothing compared to other types of debt, it has always been extremely difficult to repay student loans in bankruptcy, although the Biden administration has recently released new guidelines to simplify the process. Before the pandemic, thousands of borrowers had their Social Security checks garnished because their student loans were in default.

The share of U.S. household debt absorbed by student loans could decline if Biden’s student loan program survives his legal challenges and takes effect. It is estimated at cancel about $525 billion of federal student loan debt, according to the Committee for a Responsible Federal Budget.