- Associated Press - Wednesday, October 26, 2011

As President Obama prepared to announce new measures Wednesday to help ease the burden of student loan debt, new figures painted a demoralizing picture of college costs for students and parents: Average in-state tuition and fees at four-year public colleges rose an additional $631 this fall, or 8.3 percent, compared with a year ago.

Nationally, the cost of a full credit load has passed $8,000, an all-time high. Throw in room and board, and the average list price for a state school now runs more than $17,000 a year, according to the twin annual reports on college costs and student aid published Wednesday by the College Board.

The large increase in federal grants and tax credits for students, on top of stimulus dollars that prevented greater state cuts, helped keep the average tuition and fees that families actually pay much lower: about $2,490, or just $170 more than five years ago. But the days of states and families relying on budget relief from Washington appear numbered, and some argue that while Washington’s largesse may have helped some students, it did little to hold down prices.

“The states cut budgets, the price goes up, and the (federal) money goes to that,” said Patrick Callan, president of the National Center for Public Policy and Higher Education. “For 25 years we’ve been putting more and more money into financial aid, and tuition keeps going up. We’re on a national treadmill.”


Nonetheless, President Obama planned to announce a series of steps to help with one of the consequences of rising college prices: student debt. This year, total outstanding student loan debt has passed $1 trillion, now exceeding credit-card debt. And concerns about student loan debt have been front and center with many of the “Occupy Wall Street” protesters.

Louisiana State University students Mark Nehlig (left) and Brian Sain lift a coffin representing education on the steps of the Louisiana Capitol in Baton Rouge, La., in November 2010, after after a rally to protest cuts to higher education. (AP Photo/Patrick Semansky)
Louisiana State University students Mark Nehlig (left) and Brian Sain lift a ... more >

Mr. Obama will use executive authority for two loan-relief measures. First, he will move up the start date — from 2014 to 2012 — of a plan Congress already passed that reduces the maximum repayment on federal student loans from 15 percent of discretionary incomes to 10 percent. The White House says that about 1.6 million borrowers could be affected and that remaining debt would be forgiven after 20 years, instead of 25.

The administration also will allow 5.8 million borrowers with outstanding loans from two federal programs — direct lending and the Family Education Loan Program — to consolidate into a direct loan, potentially saving some borrowers hundreds of dollars per month.

Those changes may not help new borrowers much, but they could put cash in the pockets of millions still paying back their loans. They also could encourage more borrowers to take advantage of the income repayment options that are already in place but not widely known. Finally, by consolidating into direct lending, more could qualify for that program’s public service loan forgiveness, which can forgive debts after just 10 years of repayments for people working in nonprofit or public service jobs.

In the College Board’s latest price report, some of the increase was driven by huge increases at public universities in California, which enrolls 10 percent of public four-year college students and whose 21 percent tuition increase this year was the largest of any state.

But even without California, prices would have increased 7 percent on average nationally — an exceptional burden at a time of high unemployment and stagnant family incomes.

Terry W. Hartle, senior vice president at the American Council on Education, which represents colleges in Washington, said the cause of the price increases for the 80 percent of college students who attend public institutions is clear. State appropriations to higher education declined 18 percent per student over the past three years, the College Board found, the sharpest fall on record.

“To see increases of 20 percent, as we saw in California, to see gains of 15 percent in other states, is simply unprecedented,” Mr. Hartle said. “Tuition is simply being used as a revenue substitute in many states.”

The College Board reports roughly 56 percent of 2009-2010 bachelor’s degree recipients at public four-years graduated with debt, averaging about $22,000. At private nonprofit universities, the figures were higher — 65 percent and around $28,000. Those figures are likely to rise, though private borrowing — usually more dangerous than government loans — has been falling.

“Psychologically, practically, it’s a big number, and it will inform important choices, like when and whether you buy a home, start a family, save for retirement or take the risk of starting a new business,” said Lauren Asher, president of the Institute for College Access and Success, who also applauded the Obama announcement.

Ms. Asher and other experts emphasize that the types of loans students take out can be as important as the amount. In general, a college degree remains a good investment.

Story Continues →