Posted by: Discover Scholars | May 19, 2009

Rise in Financial Aid and Tuition

We’ve been writing recently about secular trends that are impacting higher education. The following analysis further explores some of the data that underlie the rise in tuition prices and increase in financial aid.

by Heidi Taylor, Guest Contributor

The decision to attend Ivy League schools has remained surprisingly unhindered by the recent economic downturn.  Most schools in the East have not seen a dramatic drop in admissions, and have remained at a rate consistent with last year’s.  Many colleges are offering more merit-based scholarships, but even schools like Yale that have not upped their scholarship funds continue to draw in thousands of applicants.  While demand for schools like Yale and Harvard is less elastic than than that of other schools, even the Ivies were preparing for a smaller applicant pool.

Many Ivy League schools have also increased the amount of need-based scholarships they offer to incoming students, with Harvard boasting an 8 percent increase in the amount of scholarships as compared to last year. Harvard has also instated a policy since 2007 that allows families with incomes under $180,000 to put no more than 10 percent of their income toward tuition, with the rest covered by the school. In the short term, this has resulted in an increase in their financial aid budget, but it’s likely that these increased costs — coupled with substantial endowment declines — will put upward pressure on Harvard’s future tuition price.   Already, Harvard’s tuition has increased by 3.5 percent from last year, while financial aid increased by 18 percent — bringing the school’s budget to $147 million, according to the Harvard Gazette.

On the other side of the spectrum, many public schools were anticipating a rise in admissions due to the economy (or at least a larger rise than private schools), though there has been little fluctuation in this regard.  Applications for financial aid, however, have seen a significant increase, with many public schools’ financial aid offices reporting upticks of several percentage points.  Additionally, most public schools have been forced to raise their tuition rates because of cuts in state funding; this has resulted in fewer course options, larger class sizes, and even the laying off of professors. Incoming Texas A&M students, for example, have witnessed a tuition increase of 26% in just the past year.

From the perspective of lawmakers, cutting education spending can yield significant cost savings to already strapped state budgets, because parents of college-bound students have little choice but to cover the difference between tuition charged and financial aid received. There’s no question that it is going to be difficult for many high school students to think about the future when they see eye-popping rises in tuition rates with few options to help pay for it. For this reason alone, alternative means of student financing will be all the more important.

The post was contributed by Heidi Taylor, who writes about online graduate degree programs for GraduateDegree.org.  She welcomes your feedback at HeidiLTaylor006 at gmail.com.

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