What Does the Future Look Like for College Financial Aid?

Study the College Board's Trends in Higher Education for Clues

Wouldn’t it be nice if parents of high school and college students could gaze into some kind of crystal ball and predict the future about paying for college before completing the FAFSA? That would make it so much easier to save money, choose a college, and predict the amount of financial aid the student might receive. Unfortunately, predicting the future with a high degree of certainty is very difficult, but one helpful tool is now available.

College Board, the not-for-profit purveyor of the SAT®, the Advanced Placement Program®, and CSS/Financial Aid PROFILE®, works to improve the quality of, and expand access to, higher education. Each year the organization conducts a fascinating study of Trends in Higher Education, including Trends in Student Aid and Trends in College Pricing. The recently-released 2016 report points to a continuing decline in the rate of student borrowing, a moderate increase in the published prices of colleges, and an ongoing increase in the net prices students actually pay to attend college. Some findings from the most recent study, along with a few thoughts on how they might impact families with high school or college students, include:

  • Published prices: ​When starting down the college journey road, the first place most students and parents check is each college’s pricing page to learn about expected tuition and fees. The report shows that there was an increase of about 2.2 percent to 3.6 percent between 2015-16 and 2016-17. Depending on the college’s older anticipated costs, this increase does not usually amount to a significant amount of money. Parents can probably anticipate similar increases in the coming years, ​but need to understand that the published price is not necessarily what they will pay when financial aid and scholarships are figured into the equation.
  • Net prices: When adjusted for inflation, the increase in published prices was actually quite moderate. The problem for parents comes when looking at the actual money most families spend to send a child to college, after considering financial aid from all sources and taking federal education tax benefits into consideration. Because financial aid and family incomes have failed to keep up with the rising college costs, some families are seeing an increase in their out-of-pocket costs.
  • Education borrowing: Despite the increase in net pricing, education borrowing declined in 2015-16 for the fifth consecutive year, falling 14 percent from 2010-11 to $106.8 billion in 2015-16. Loans received from federal and private loan lenders combined constituted approximately 36 percent of the funds used by undergraduates to supplement their own and family resources. In 2014-15, 61 percent of the bachelor’s degree recipients who borrowed money to attend college graduated with an average of $28,100 in debt. These findings might indicate that fewer students are attending college, they are finding alternative ways to pay for college, they are saving or earning more money to pay for college, or they are opting for lower-cost colleges that are more in line with their financial capabilities.

The type of college selected does play a role in the costs and financial aid. According to the Trends report, grant aid can usually cover tuition and fees at full-time, public two-year colleges. Full-time students at public four-year colleges were reported to receive about $5,880 in grant aid and tax benefits, which covered about 60 percent of their in-state tuition and fees. Full-time students at private four-year colleges received an approximate $19,290 in grant aid and tax benefits, which covered some 58 percent of the college’s published tuition and fees.

Parents of students from middle school to college can analyze this data on college prices and student aid to evaluate their own capabilities to afford a college education. If something is coming up short, it is time to consider other options but, if you still wonder whether it is really worth the time, money and effort to attend college, the College Board’s “Education Pays 2013: The Benefits of Higher Education for Individuals and Society” might be able to provide some input. This interesting report examines the primary differences in the earnings and employment patterns of U.S. adults who possess different levels of education.