Financial aid - numbers show increasing college grants, stagnant gov't support
Minnesota Private College Council members contributed an additional $25 million to institutional scholarships and grants to traditional undergraduates in 2004-2005, reflecting their commitment to making college affordable for every student who enrolls. The latest information on financial aid to traditional undergraduates from the Minnesota Private College Council’s (MPCC's) 17 members shows a pool of more than $253 million for the institutions' scholarships and grants to assist lower-income and academically high achieving students. While these grants grew at approximately twice the rate of tuition and fees, it is clear that this situation is not sustainable; institutional grantmaking alone cannot sustain access for lower-income students and affordability for middle-income families.
The current financial aid snapshot
While the actual price paid is typically considerably less, the total posted price of an undergraduate education at the MPCC colleges averaged $29,400 in 2004–2005, based on data received and analyzed this summer by the Minnesota Private College Research Foundation. This total includes tuition and fees, room and board, books, supplies, transportation and other expenses.
For more than 31,000 of the colleges’ 35,000 traditional undergraduates, the actual price is lowered by financial aid. In 2004–2005, member institutions distributed more than $580 million in financial aid.
Consider a student whose family is in the median income bracket ($55,500 – $63,500). The typical student from this income level received an average of $12,400 in grants and scholarships that did not have to be repaid. Eighty percent of grants and scholarships were funded by the college ($9,900). The remaining funds came from federal, state and private sources.
To finance the remaining amount ($17,000), the federal student aid guidelines expect the parents and student to contribute $8,900 of income to the cost of the student’s education. The remaining amount ($8,100) can be financed in part through the federal student loan programs. The federal student loan programs are designed to assist lower income students through interest subsidies while giving all students access to funds. Students at Minnesota’s private colleges averaged $5,500 in student loans for 2004–2005 — giving them an average student loan debt of $22,000 after graduation.
Any remaining costs ($2,600) are to be met by the family with savings or additional loan options. Unfortunately, current saving patterns aren't helping. Data from the U.S. Census Bureau’s Bureau of Economic Analysis (BEA) indicate that per capita personal savings by Americans is at its lowest level (-0.5%) in any year since the Great Depression.
Future financing trends
Increases in institutional scholarships and grants fill some gaps left by declines in state and federal grant assistance programs and help offset increases in student borrowing. However, it is uncertain whether continued double digit increases in institutional grant aid are economically feasible for institutions.
A declining number of Minnesota private college students receive the Minnesota State Grant. In 2004–2005, 8,700 traditional undergraduates received a Minnesota State Grant averaging $3,200. Compared with 2003–2004, this is a decline of 450 recipients and $1.3 million. Federal grant aid, including the Pell Grant, has remained unchanged for the past two years at $26 million, with an average Pell Grant of $2,475 per recipient.
Furthermore, boosts in institutional grant aid help offset further increases in student borrowing. Sixty-eight percent of all traditional undergraduates received educational loans, for a total of $224 million (including parent and private loans). Private loans are the fastest growing form of loans, increasing 32 percent over the past year. Private loans represent an increased financing risk for students because of higher interest rates, less favorable loan terms and fewer safeguards.
Institutions alone cannot sustain access for lower income students and affordability for middle income families. Minnesota’s economic success is a shared responsibility among students, families, colleges and the state. Our state has merited national attention for successfully coordinating public policy around access and affordability in higher education; now it is time for Minnesota to reaffirm its dual commitment to students.