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Backgrounder: Facts about Private College and University Affordability and Accessibility

October 24, 2006

Facts about Private College and UniversityAffordability and Accessibility

Background for the 2006 College BoardTuition and Student Aid Reports

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Trends in Private College Tuition and Fees 

The College Board reports that tuition at private colleges and universities rose by 5.9 percent for2006-07. The inflation-adjusted increase in published tuition and fees at four-year private institutions between 2001-02 and 2006-07 is 11 percent lower than any other five-year increase since 1981. 

The Value of Financial Aid at Private Colleges and Universities 

The College Board also reports that the amount of student aid available grew 8 percent. While theaverage list price for tuition and fees at our institutions this year is $22,218, the average net tuition (published price minus grants and tax benefits) is $13,200--more than 40 percent below the average published tuition. 

Recent statistics from the Department of Education bear out the importance of student aid in keeping private higher education affordable to students from all backgrounds. Eighty-six percent of dependent, full-time undergraduates receive some form of aid. The average annual aid package is $15,900. Seventy-nine percent of these students receive grant aid worth an average of $9,400 a year.  

As a result, students at private institutions are as likely to come from low-income and working families, or racial or ethnic minorities, as students at public four-year universities. Students at private colleges and universities still graduate with a surprisingly similar amount in federal loans as their peers at public institutions. 

Students’ Return on Investment

Seventy-nine percent of students who earn a bachelor’s degree from a private college or university are able to do so in four years or less, compared with 49 percent of graduates at state institutions. 

Students at private institutions are also more likely to be involved on campus and in their communities, and to rate their college experience higher than their state college counterparts. 

Eighty-nine percent of private college graduates report their financial investment was worth it. Nearly 9 in 10 private college seniors say their education strengthened and expanded their writing, interpersonal, and problem-solving skills; critical thinking ability; and expertise in a particular field. 

Cost Drivers at Private Institutions 

This year’s average increase of 5.9 percent reflects extraordinary increases in several cost drivers.Two major revenue streams--endowments and philanthropic giving--continue to make up groundslowly after several years of lost revenue.

• From 1994-95 to 2004-05, grant aid provided by private colleges increased 150 percent, more than twice the rate of tuition (71 percent).

• Since 2005, the price of utilities has risen 27 percent, according to the Commonfund Institute. This is almost triple the average annual increase over the last four years.

• The median increase for health care costs at colleges was 9 percent in 2005-06, according to the College and University Personnel Association.

• In recent years, annual premiums for many types of insurance, including general liability,property, and worker’s compensation, have commonly increased by double-digit rates. Experts expect property insurance to increase between 10 to 50 percent in 2006, according to the Chronicle of Higher Education.

• Periodicals and other library materials routinely increase by double-digit rates each year. The Association of Research Libraries reports that between 1986 and 2004, research library expenditures for scholarly journals increased 273 percent.

• The cost of keeping up with innovations in information technology at private colleges anduniversities increased 26 percent in 2005-06, according to Market Data Retrieval. 

• The National Association of College and University Business Officers reports that the average college endowment earned 9.3 percent in 2005. However, when inflation and endowment spending rates are taken into account, the five-year average return of 3.3 percent translates into a decline in endowment earning potential over that time.

• According to the Council for Aid to Education, philanthropic giving to institutions increased by 4.9 percent between 2003-04 and 2004-05. Adjusted for inflation, the increase is 1.6 percent. Corporate giving did not increase and gifts from individuals other than alumni declined.

 Cuts in Federal Student Aid as a Cost Driver 

Congress has not kept funding for student aid in line with inflation, growing family need, or the wave of low-income and first-generation college students who are academically prepared for college. The erosion of federal student aid in the past five years has become an additional strain on college budgets as institutions attempt to fill the gap. Students at private colleges today receive nearly five times as much grant aid from their institutions as from the federal government. 

The maximum Pell Grant hasn’t increased in five years. The constant dollar value of the average Pell Grant declined for the second consecutive year in 2004-05. Because of flat Pell funding and cuts in the federal campus-based aid programs, grant and work-study packages for students have shrunk. This is not the way to make higher education affordable for America’s working families. It is also putting the public good provided by higher education at risk. 

We support the call by the Secretary of Education’s Commission on the Future of Higher Education to increase the maximum Pell Grant to 70 percent of the average cost of in-state tuition at a four-year public university, from the current 33 percent. Such a move by Congress would have the long-term benefits of the G.I. Bill, positioning the nation to safeguard its role as a global economic, scientific, political, and security leader. Private colleges and universities remain dedicated to controlling costs, increasing accessibility, and maintaining quality. Congress needs to keep up its commitment to needy students, their future, and the future of the national interest. 

Institutional Efforts to Enhance Affordability and Control Costs 

All colleges—and their students—face financial pressures. Private institutions are addressing them by implementing innovative affordability and cost-cutting initiatives. There is no one-size-fits-all approach to cost control and affordability, because of differences in mission, student population, and fiscal resources. Private colleges are employing a variety of strategies.

• A small but growing number of private colleges and universities are reducing their sticker prices for tuition and fees.

• Others have locked in the tuition rate for a student’s four- or five-year enrollment. This means that tuition remains the same each year for a student.

• Several are tapping endowment funds to assist low income students: covering tuition, room, and board; eliminating loans; lowering parental contributions; and matching Pell Grants.

• Others offer three-year bachelor’s degree programs, or four-year graduation and employment guarantees.

• • While funds from state tuition savings plans can be used at private colleges throughout the nation many institutions have gone further to develop tuition prepayment plans for future students.

 To control operating expenses, more institutions are: 

• Entering into consortial arrangements to reduce administrative and academic redundancies, and leverage their purchasing power to obtain lower costs for energy, insurance, information technology, and other services;

• Outsourcing campus services, such as grounds and facilities maintenance, alumni relations operations, residence hall management, billing and other “back office” functions, and bookstores; and

• Turning to environmentally friendly systems to lower energy consumption; streamlining staff; and consolidating offices and programs to enhance efficiency.

 Examples of affordability, cost-saving, and consortial initiatives are posted on the NAICU Web site at www.naicu.edu/news/campusinnovations.asp. 

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Contact

• Tony Pals
  (202) 785-8866
  tony@naicu.edu