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The cost of college is falling - for some
By Mitchell Schnurman
Star-Telegram Staff Writer
Here's something you don't hear every day: The cost of college is going down -- a lot.
At least that's the case at Harvard, Yale, Swarthmore, Williams and a growing number of private universities, along with a sprinkling of public schools. This isn't pure altruism; politicians and regulators are bearing down on colleges after years of unrelenting tuition increases and rising student-debt levels.
Last year, student-loan scandals also hurt some schools' credibility and shed light on the many ways that colleges rack up big bucks.
Surprisingly, many of the latest money-saving moves are aimed at middle-income families, which often make too much to qualify for much financial aid but don't have the cash flow to handle hefty college bills.
Schools in Texas aren't following in lockstep, but some positive developments are emerging. Last week, the University of Texas System agreed to tap more of its huge endowment to offset rising costs. That won't lower tuition and fees, especially at flagship universities in Austin and College Station, but it's expected to slow the steep climb.
At Texas Christian University, financial aid will be increased 18 percent next year after the school's $1.2 billion endowment grew almost 17 percent in 2007. That's part of a plan to attract stronger students to the private school in Fort Worth.
At least 40 colleges have adopted meaningful changes, including limits on student debt or doing away with student loans altogether. Instead, they're pledging to award more grants, scholarships and work-study -- aid that does not have to be repaid.
Politics plays a role
These shifts could have a dramatic effect on the net prices paid by some students and their parents. At Yale and Harvard, for example, the tuition cost for a student from family of four with an annual income of $80,000 would be only half that of a major public university, including the biggest colleges in Texas.
This is surprising, because sticker prices at elite privates tend to be at least twice as high as at most public colleges. Private schools have always cut discount deals for exceptional students, and they generally cover most costs for those from the lowest-income families. The latest moves are intended to get middle-income families to reconsider the privates, rather than assume that they're financially out of reach.
(There is the little matter of actually getting accepted by these elites. At Harvard, 22,754 applied and 2,125 got in.)
A key political calculation is also at work here. Presidential candidates are talking up the need to make college more affordable, and Congress has been boring into the issue for months. A Senate committee is scrutinizing the explosive growth of endowments, suggesting that wealthy schools use that pool to reduce the burden on students and families. Lawmakers are also pushing for more detailed disclosure about pricing.
The unstated but clear threat is that if colleges don't make changes on their own, government is ready to force the matter.
College administrators generally say that they were already exploring ways to make college more affordable and pricing more transparent, because complaints have been rising. The average published cost, in tuition and fees, at four-year public universities is up 51 percent in the past five years, according to the College Board.
In the past decade, the average debt load for graduating seniors has doubled to nearly $20,000. Ten percent of graduates at public schools owed at least $33,000, and 10 percent of grads from private schools owed at least $40,000, says the Project on Student Debt.
Moving the ball
The recent changes don't revolutionize the college game yet, but they move the ball in the right direction.
"So far, these policies affect a very small number of students," said Matthew Reed, policy analyst at the Project on Student Debt, whose Web site analyzes the financial pledges from 40 colleges. "The question is how other schools are going to react and compete."
TCU, for instance, could bolster financial aid but says it can't replace all loans with grants. That would cost at least $15 million and cut too deeply into the endowment, says Brian Gutierrez, vice chancellor for finance and administration. Most public schools are even more constrained, because they have many more students; public schools account for about 80 percent of all college students.
"If it were doable and the resources were available, we'd see more movement in that direction," Gutierrez said about loan limits.
Harvard changed its cost structure so that middle-income families would have to pay no more than about 10 percent of their gross income to the school. A student from a family with $80,000 in annual income will pay a net cost next year of about $11,500, Reed says. Harvard's sticker price for all costs is almost $50,000 a year.
Williams College, a Massachusetts school with about 2,100 students, has an annual price of more than $44,000. Families must pay their "expected family contribution," or EFC, which is generally the amount they're expected to pay based on their financial strength. The school pledges to cover nearly all the remaining amount with grants and scholarships. No loans at all.
The University of Virginia sets a student-loan cap of $17,000 for four years; after that (and the family contribution), it pledges to make up the rest with grants, even for out-of-state students.
The financial pledges won't always deliver what people expect. Students have to be admitted, and that's usually a tougher hurdle if they come from lower-income families, because their standardized-test scores tend to be lower.
The fine print
Then there's the fine print of the expected family contribution. Public schools generally use a federal formula that considers income, assets, family size and the number of siblings in college to determine the amount. Financial-aid departments look at the difference between EFC and total costs and call that the "unmet need."
That's where financial aid comes in. In reality, though, most families can't cover their expected contribution without borrowing. So even if a school awards grants, rather than loans, the family may rack up debt.
And most private schools have their own method for calculating the family contribution. They often look at home equity and retirement accounts, for instance. It's quite possible that the expected family contribution at a private school is significantly higher, which means that all the helpful aid on the unmet need doesn't paint a true picture of net costs.
How to figure the real costs? Congress wants to mandate a government Web site that allows families to punch in their numbers and easily compare the net costs of different schools.
Financial-aid calculators are offered by several universities; the University of Texas has a good one that gives a general idea of how much aid may be available.
But the actual aid award is made only after a student is accepted, and that's often late in a high-schooler's final year. As a result, savvy students are applying to many more schools, and more families are haggling for better deals.
This process has always rewarded tenacious consumers. But that's even more true today, because it's a time of transition, with universities adjusting their plans significantly.
Shopping for college is like shopping for any complicated financial product: Smart buyers learn how it works, and then how to make it work for them.
Let's make a deal
Some private and public colleges are trying innovative ways to reduce net costs and student-debt loads. Some examples:
University of Pennsylvania
Philadelphia
Next fall, students with family incomes under $100,000 get financial aid without any loans. By fall 2009, loans will be eliminated for all students eligible for aid, regardless of family income.
University of Rochester
Rochester, N.Y.
Next fall, graduates of Rochester public high schools will get up to $100,000 over four years to cover tuition.
Yale University
New Haven, Conn.
Next fall, all costs of education will be covered for students whose families have incomes of less than $60,000. Families with incomes of $60,000 to $120,000 will pay 1 percent to 10 percent of the student bill.
University of Maryland
College Park, Md.
For all seniors with loans totaling $15,900 or more, the school pledges to cover additional aid with grants and work-study.
California Lutheran University
Thousand Oaks, Calif.
Next fall, all freshmen who were also accepted at UCLA or UC Santa Barbara can attend Cal Lutheran for the cost of those public schools. The total four-year savings is more than $60,000 off the sticker price.
Northwestern University
Evanston, Ill.
For all students who have accumulated $20,000 in loans, the school pledges to cover additional aid with grants and work-study.
Swarthmore College
Swarthmore, Pa.
Next fall, Swarthmore will eliminate student loans in its financial aid. The plan covers current and new students.
Sources: National Association of Independent Colleges and Universities (naicu.edu) and projectonstudentdebt.org.
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