The Financial Burden for Families

Paying for college looms over families, especially at-risk families who may have had little or no experience with college. They see tuitions rising faster than inflation and family income. And they are worried about whether college will be affordable for them. People generally see college prices as just too high.

Postsecondary opportunities are wide and varied in this country. More than 7,000 institutions exist, ranging from local community colleges to vocational training institutions to four-year public and private colleges to major research universities. Increasingly, distance-learning opportunities are available at traditional institutions as well as newly created virtual institutions.

The prices charged by institutions—referred to as sticker prices—also vary: in 1999-2000 the average annual tuition and fees charged at two-year public institutions were $1,627; at public four-year institutions the average was $3,356 for in-state students and $15,380 for private four-year colleges and universities. The average price (including tuition, fees, room, and board) for four-year public institutions represents 61 percent of family income for low-income families; 17 percent for middle-income families; and 5 percent for the high-income group. The average price for four-year private institutions represents 162 percent of family income for low-income families; 44 percent for middle-income families; and 14 percent for the high-income group.³³

Many students apply for and receive financial aid—grants, loans, work-study jobs, and new tax breaks—that helps to reduce the amount that families and students must pay out of pocket. This net price actually paid by students and families is often significantly below the sticker price. Due to significant increases in aid under the Clinton-Gore Administration, net price has risen more slowly than sticker price in recent years.³⁴ Even so, both measures of price have risen faster than family incomes, meaning that families are now paying a larger share of their income for college. (Unfortunately, detailed up-to-date data on net price by family income are not available.)

Polls show that many Americans do not have an accurate picture of what college actually costs. They consistently overestimate the sticker price of college and underestimate the financial resources available to them to pay for college because they do not know what is available to them through different forms of aid.

So much attention is paid each fall to the prices charged by the most expensive private institutions that many Americans have skewed views of the cost of college. Private institutions account, however, for only 2 out of every 10 undergraduate students enrolled in the 3,500 colleges and universities.³⁵ Most students attend public institutions, whose tuition and fees are much lower. In 1999-2000 more than 50 percent of all undergraduates attended institutions that charged tuition and fees of $4,000 or less per year and only 7 percent attended institutions charging tuition and fees of $20,000 or higher.³⁶

Although the Department of Education has made significant strides in simplifying the financial aid application process—cutting the instructions in half—obtaining student aid has long been a complicated process of determining what a family should be able to pay for their family members’ education and their eligibility for different types of aid. As a result of a trend established in the 1980s, more than half of all student financial aid now provided to students and their families comes in the form of loans, which must be repaid after leaving school. Paying it back can take some time, although several recent initiatives have lowered borrowing costs for students and their families. A recent U.S. Department of Education study indicates that four years after graduating, only 16 percent of those students who had borrowed money were debt free. Of those participating in the federal survey, 51 percent had debt from a variety of sources averaging $10,000.³⁷ Despite increases in student borrowing, the Clinton-Gore Administration has lowered default rates on federal loans from 22.4 percent in fiscal year 1990 to 6.9 percent in fiscal year 1998.³⁸

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