higher education - tuition, grants & loans

Facts

As college applications increase (see higher ed overview) so do tuitions – and a college education, though desirable, remains unaffordable to many Americans. To help reduce the high costs of a college degree, the federal government offers large amounts of student aid in various forms. Here's a summary of what the federal government is doing to help students.

Cost

Average tuition and fees at a 4-year public university (05-06) CB:

  • $5,700

Average tuition and fees at a 4-year private university (05-06) CB:

  • $21,800

Aid

Factoring in financial aid, tuitions come down some. CB

  • Average tuition with aid (05-06) at:

    • Public 4-year colleges:

      • $2,500

    • Private 4-year colleges:

      • $12,600

over the years - average tuition factoring in aid

During the 2004-2005 school year $129 billion in total aid to students plus $14 billion in private loans was served up to help reduce the high cost of attending college. Here's where the money came from:

source: CB - pdf

The Feds' role

The federal government offers various types of financial assistance to undergraduate and graduate students.

Loans

What they are: A loan is money offered to students or parents which is to be paid back after college.

How much is available: The federal government issued $56.8 billion in loans during the 2003-04 school year. Additionally, $11.3 billion in non-federal loans was awarded to students. The average amount of loans a student received during the year was $5,840 . CB

Number of students that receive loans: During the 2003-04 school year 33.7% of undergraduate as well as 39.5% graduate students borrowed money from the federal government. NCES

Types of loans FSA:

Perkins Loans: Perkins Loans award a certain amount of money to a college or university who in turn awards it to students. Each school gets a capped amount to loan out. Undergraduates can receive up to $4,000 a year and graduate students can receive up to $6,000 a year. Students have up to 10 years to repay their college. The Perkins Loan has an interest rate of 5%.

Stafford Loans: Stafford Loans are loans issued directly to students either by the Department of Education or by a bank or credit union. Undergraduate students can receive up to $10,500 a year and graduate students can borrow up to $18,500 a year. Recipients have between 10 and 30 years to repay their loans. The interest rate on Stafford Loans changes every year but during the 2004-05 school year it was 3.37%. Updates: A 2006 budget bill raised the ceiling on how much students could borrow and also set a new fixed interest rate at 6.8% (NYT). In 2009, the Education Department lowered the payment schedules for graduates in public service jobs and reduced interest rates yet more - down to 3.4% by 2012 (NYT).

PLUS Loans: PLUS (Parent Loans for Undergraduate Students) Loans are just like Stafford Loans except they are issued, as the name implies, to parents of undergraduate students. Parents can receive loans equal to their child's entire cost of attendance. Like Stafford Loans, Parents have between 10 and 30 years to repay their loans. The interest rate during the 2004-05 school year was 4.17%. Update:
The 2006 budget bill raised the ceiling on how much parents could borrow and also set a new fixed interest rate at 8.5% (it was scheduled to go up to 7.9%). NYT

Grants

What they are: Grants are money issued to students to pay for college that do not have to be paid back.

How much is available: The federal government issued $17.2 billion in grants to students during the 2003-04 school year. Additionally, states offered $6.0 billion and colleges and universities issued $23.3 billion in grant money. The average amount of grant aid a student received during the year was $3,986. CB

Number of students that receive grants: During the 2003-04 school year 27.6% of undergraduate students received grants from the federal government. 50.7% of undergraduate and 40.1% of graduate students received some type of grant money. NCES

Types of grants available FSA

Pell Grants: While there are different federal grant programs for students, such as grants for veterans and medical students, the main program is the Pell Grant. Pell Grants are usually only available to undergraduate students. During the 2004-05 school year the maximum award was $4,050 .

Federal Supplemental Educational Opportunity Grants (FSEOG): The federal government awards a certain amount of FSEOG to colleges or universities who in turn award the money to their students. FSEOG are awarded to undergraduate students with exceptional financial need . Students can receive up to $4,000 a year in these grants.

Federal Work-Study

What it is: Federal Work-Study provides part-time jobs for students to help them pay for their education.

How much is available: Federal Work-Study accounted for $1.2 billion in student aid during the 2003-04 school year. CB

Number of students involved in Federal Work-Study: 5.6% of undergraduate students were involved in Federal Work-Study during the 2003-04 school year. NCES

Tax Credits

What they are: Tax credits reduce the amount of income tax an individual must pay so they will have more money to pay for higher education.

How much is available: During the 2004-05 school year education tax benefits accounted for $6.3 billion in higher-ed financial aid. CB

Number of students receiving education tax credits: Anyone with an income under $52,000 who is paying for higher education, whether they are an independent student or a parent paying for their child, is eligible for a tax break. IRS In 2002 6.5 million people received education tax credits. IRS -download

Types of tax credits available IRS

Hope Credit: Anyone with an income under $52,000 or a joint income under $105,000 and is paying for higher education is eligible for the Hope Credit. The tuition-payer can receive up to $1,500 per student, however the Hope Credit is only available for the first 2 years of higher education.

Lifetime Learning Credit: The eligibility requirements for redeeming the Lifetime Learning Credit are the same as for the Hope Credit. The tuition-payer can receive up to $2,000 per year, no matter how many students he or she is paying for. This credit, unlike the Hope Credit, can be redeemed for an unlimited amount of years. An individual cannot claim both credits in a single year.

Where the facts are from:

Other resources:

Random opinions and articles that caught our eye

  • The president of Miami U. in Ohio explains how public colleges are in a financial and regulatory pinch and how states can reverse that trend.

  • An NYT article explains one reason why private colleges are hiking up prices and increasing financial aid (spoiler: shoppers love a sale).

Updated August 2006

Did we miss something, let some slant slip in, lose a link - or do you just have something to say? Drop a line below! In the spirit of open dialogue, cJ asks you keep it civil, keep it real and keep it focused on the message, not the messenger. See our policy page for more on what that all means.

Posted In

Educate financially

With this slumping economy, tuition fees for college education keep on rising that it’s hard for the student to pursue this level of education. For this reason, some financial alternatives such as student loans come up to help these students on financial trouble. However, taking out this kind of alternative is seems like taking a risk because of the interest rate being asked by some lenders. Concerning to this, Utah is looking to become the next state to put interest rate caps on payday loans – otherwise known as a ban in all but name.  The Utah state legislature is mulling over legislation that would cape APR at 100% in the state, which is funny because a two week loan by definition can't be annual, therefore payday loans should technically be exempt, shouldn't they?  At any rate, it will be awhile before the bill gets out of committee to the floor for a vote.  It seems an honest business can't catch a break, but crooked banks that can't run a balance sheet get loads of taxpayer cash.

Carmen O | February 26, 2009 - 4:04am