SAT test creator: Don't let tuition hikes scare you
SAT test company, The College Board, releases studies saying that while tuition still outpaces inflation, jumps in federal and private grants are keeping up.
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In 2009-10, the biggest sources of student aid besides Pell Grants were federal loans ($65.8 billion) and institutional grants ($26.0 billion). Altogether, these three sources accounted for 78 percent of all undergraduate student aid. Other sources included private and employer grants, state grants, federal work-study, federal tax credits and deductions, and non-Pell federal grants.Skip to next paragraph
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Federal contributions to student aid have shown the biggest growth, the report showed. In 1999-2000, federal grants comprised 29 percent of all grant money. That stayed near-constant, increasing only 2 percentage points by the 2007-08 school year, then increased to 34 percent in 2008-09, and then jumped to 44 percent for 2009-10.
The growth in both state grant aid and private or employer grants slowed in the second half of the decade, but federal and institutional grants grew more rapidly during that period. Two-thirds of American students get grant aid, and nearly all take advantage of federal tax credits and deductions.
Much of the aid is earmarked for those who can demonstrate financial need, but not all. State aid, in particular, has widely varying requirements. In Illinois, Minnesota, New York, and Texas, most grants are need-based, but in Georgia, nearly all state grant aid is merit-based; in fact, the average aid to the highest-income Georgia students was higher than aid to lower- and middle-income students in 2008-09. Additionally, while 90 percent of the education tax credits went to families with an adjusted gross income between $25,000 and $100,000, two-thirds of the savings from the tuition tax deduction went to taxpayers earning over $100,000.
"While we're encouraged by significant increases in financial aid," said Dr. Baum, "under the current economic conditions, too many students and families are still struggling to pay for college."
Loans remain a heavy burden to students, but the federal government is edging out private lenders. Private loans accounted for 25 percent of student loan dollars three years ago, but they dropped to just 8 percent this past year.
Increased use of federal instead of private loans has long-term benefits to students and families, as federal loans offer lower interest rates and deferred interest. The interest rate on subsidized Stafford Loans has continued to fall. It declined from 6.8 percent in 2007 to 4.5 percent for this school year, and is expected to drop again to 3.4 percent for the 2011-12 school year.
A previous College Board report showed that even considering student loan debt, college does pay for itself, eventually. College graduates earn enough more than high school graduates to pay off their student loans within 11 years, on average, and then continue to earn at higher levels.
"Financial aid is critical for bringing college into reach for many, many families," said Baum.