But researchers dismiss the simplistic argument that colleges hike tuition every time federal aid is increased. The problem, they explain, is that colleges are very expensive to operate because they are labor-intensive. More important, they say, public institutions often raise tuitions substantially because, every time there is a recession, states cut higher education budgets. “The steepest tuition increases in public higher education have been imposed during recessions, when students and families (particularly those from the lowest-income groups) are least able to pay,” reports the National Center. Such ill-timed tuition hikes are nothing new, says National Center President Patrick M. Callan. “The continuing pattern in setting tuition over the past 20 years is that, during recessions, the financial problems of states and colleges are given more weight than those of students and families,” Callan says. That is precisely what has happened during the current economic downturn, with some colleges increasing tuition by nearly 30 percent.
“Public institutions, where 80 percent of undergraduates are enrolled, are busily raising tuition to offset the loss of state support,” says policy analyst Mortenson. In some states, such as Ohio, the pain of tuition hikes has been lessened somewhat by increases in financial aid for the neediest students, but the overall effect is still negative: The vast majority of students are paying more — often substantially more — out of their own pockets.
At the same time that the purchasing power of Pell Grants began to decline, the federal government made a policy shift that has hurt needy students. The National Center says: “Since 1980, federal financial aid has been transformed — with little explicit policy debate — from a system characterized mainly by need-based grants to one dominated by loans.” In 1981, the National Center reports, loans accounted for 45 percent and grants for 52 percent of all student financial aid. In 2000, loans represented 58 percent of all aid, and grants represented 41 percent. And if only federal aid is considered — in other words, if we exclude statebased aid programs and grants from individual colleges and universities — the shift from grants to loans is even more dramatic. According to the College Board, loans accounted for 78 percent and grants only 22 percent of the $54 billion in federal financial aid distributed in 2001-2002.
This shift toward loan aid, says Ann Coles, senior vice president at The Education Resources Institute (TERI), reflects a change in philosophy about who benefits from higher education. “We moved from the view that society benefits to the view that the individual benefits, so the individual should pay for college,” she explains.
Largely because of the change in the grant-loan mix, student debt levels have climbed dramatically. In fact, according to figures from the National Center for Education Statistics, the amount of student debt has nearly doubled during the last 10 years for bachelor’s degree recipients. Figures from the American Council on Education (ACE) show that, in 1999-2000, a full-time student who had to borrow for college owed nearly $17,000 in loans, on average, when he or she graduated from a four-year school — up from about $9,200 in 1992-93. And these debt levels are climbing for students at both public and private institutions.
According to ACE, average student loan debt at four-year public colleges increased by more than $5,000 between 1995 and 2000 — to $15,375. During that same period at private four-year institutions, average debt rose more than $4,000 — to $17,250.
