More and more high school students are attending college. According to the Bureau of Labor Statistics of the U.S. Department of Labor, over 70 percent of the high school graduating class of 2009 were enrolled in colleges or universities in the fall. This proportion is 1.5 percentage points higher than a year earlier in 2008 and represents the highest rate of enrollment since 1959.
College Costs: An Overview
During the 2009-2010 academic year, college costs (tuition and fees) increased an average of:
- $555 at four-year public institutions or 7.9 percent
- $1,111 at four-year private institutions or 6 percent
- $155 at two-year public institutions or 6 percent
Total charges, including room and board, increased 5.6 percent for public institutions and 4.5 percent at private institutions.
The average cost for tuition, fees, room, and board at a four-year public institution averaged $28,103 in 2009-2010. The average cost for tuition, fees, room, and board at a four-year private institution averaged $36,993 in 2009-2010. Although rates have increased, they do not represent a trend of accelerated rate increases.
Financial aid to students is growing. In 2009-2010, $199.2 billion was distributed in student financial aid, $32 billion more than distributed the previous year.
- Total aid per full-time equivalent (FTE) student averages about $11,461, with $6,041 of that amount in the form of grants.
- Grant aid per full-time equivalent student grew 3.5 percent this year, compared to a 6 percent increase in loans per FTE.
Pell Grant funding rose by 26 percent in inflation-adjusted dollars. However, the average Pell Grant increased only 3 percent, providing an additional $200 per recipient. The $2,770 average Pell Grant covers less than 20 percent of average total charges (tuition and fees, room and board) at public four-year colleges and universities, while the maximum Pell Grant covers 34 percent of these charges.
Institutional grants have greatly increased over the past decade, from 28 percent in 1999-2000 to 42 percent in 2009-2010. These funds make up about 52 percent of the grant aid that undergraduates at private colleges receive, and about a quarter of the grant aid used by those attending four-year public institutions.
Identifying Financial Need and Awarding Financial Aid
If you will need financial aid to attend college, be attentive to the financial aid policies of schools you are interested in attending. In some cases, there are schools that will not consider your request for financial aid unless you apply for financial aid at the same time that you apply for admission. Be sure that your financial aid application arrives on time.
The financial aid office will open a case file for you and perform the following analysis. First, they will calculate your college costs for the upcoming year. That dollar amount is your “cost of education.” Second, your “family contribution” will be calculated based upon the FAFSA (free application for federal student aid) and, if applying to a private college, usually the CSS (College Scholarship Service) Profile and tax returns will also be considered. The gap between the cost of education and family contribution is your “demonstrated need.”
Once the financial aid department identifies the “demonstrated need,” they begin to develop a financial package to offer you. Some schools notify you of your financial aid award at the same time that you receive your admission decision. Others send the financial aid award letter after your admission decision letter. Some schools are able to offer incoming students with financial need a complete financing package that covers the total cost of education. Other schools cannot cover the whole cost and leave a “gap” that must be filled through other sources, such as outside loans. According to the National Association of College Admissions Counselors, 23 percent of all colleges close the “gap” based on the academic desirability of a student.
Closing the “Gap”
The financial aid office fills in the gap in the following order:
- Self-help funds in the form of work-study and loans. The area of loans for school is beyond the scope of this book. However, you should be aware of how these loans work. Go to www2.ed.gov/fund/grants-college.html for complete information or check with the financial aid office of your college.
- Federal Pell Grant or state grants may be available for students with very significant financial need.
- Institutional funds from the university.
If there continues to be an unmet gap, the family will typically turn to Parent Plus loans, alternative student loans, and/or scholarships to make up the difference.
Impact of Scholarships on Financial Aid
Scholarships are an excellent way to fill the gap between your need and the college financing package. However, financial aid from all sources may not exceed the calculated cost of education. Consequently, if you have $2,000 in scholarships, and your college offers you a full package without a gap, or the gap is only $1,000, you have an extra $1,000 that will have to be reconciled.
Many colleges allow students to use scholarship funds in excess of calculated need to reduce the amount of loans taken. Other schools reduce their institutional grants on a one to one basis with scholarship awards, thereby destroying the incentive to seek awards. Other schools use a phased approach where, for example, the first $500 in scholarships reduces loans and any amount over $500 is equally split between reducing loans and reducing institutional grants.
You must check with your school to see what their policies are regarding outside funding. In most cases, scholarships will decrease your overall college costs.
There is also a certain amount of flexibility in financial aid packages. So if you think that your family’s financial need isn’t completely represented by the usual financial analysis, make an appointment with a financial aid counselor to review your specific situation. There may be an opportunity to substitute more institutional grants for loans or find other creative ways to improve your package.