Why are college costs going up? -- Page 2

For private colleges, endowments are "a major funding source," says Pals. But the revenue from those endowments has been depressed with the economy. "Private college endowments earned 2.9 percent in 2003. That follows losses of 3.6 percent and 6 percent in two previous years."

While private schools had been used to double-digit percentage increases in philanthropic gifts, they've started seeing declines. From 2001 to 2003, contributions went down 1.2 percent, says Pals. "And that drop was the first decline in 14 years," he says.

- advertisement -

The good news is that administrators expect to earn larger returns on their endowment money in the next few years, says Pals.

What about financial aid?
Students are also getting pinched when it comes to obtaining financial help. Record enrollment has left more students competing for stagnant or slow-growing sources of financial aid.

"At the same time states are cutting budgets for colleges and universities, they are not putting money into financial aid," says Jacqueline King, director of the center for policy analysis for the American Council on Education. "States, in most cases, have not raised their spending on student aid to keep up with the increases they've approved in tuition.

"Aid increased proportionally during the 1990s," says King. "Since then, we've gone into an economic downturn, which has hit the states particularly hard. We've seen much larger increases in prices than in financial aid."

For the most part, federal money hasn't increased with demand, either, says King. Grants and loans "have gone up," she says. "But both amounts have not gone up substantially vs. inflation."

Ask not for whom the Pell tolls ...
For many families making $40,000 or less annually, the cost of college just went up. The 2005 congressional budget changed the formula families use to determine their income when applying for federal need-based Pell grants. Families will not be able to subtract as large a portion of state and local taxes from their incomes. And since family earnings will appear higher on paper, many students will have their grants reduced or eliminated.

About 1.3 million students, a full quarter of those receiving Pell grants, will have their grants cut by some amount, according to numbers from the American Council on Education. These students come from families earning approximately $20,000 to $35,000. Another 90,000 students, many from families making $35,000 to $40,000 annually, will lose the grants entirely, according to the group.

"Any change in federal policy that would take student aid money away from families is not good policy," says Pals. "If anything, the government needs to be supportive of families and students who want to be able to afford higher education."

Curtis fears that the formula of higher prices, more students and less aid will change public access to college. "One of the things that we're concerned about, even among public institutions, is that schools are being more selective and that higher tuition prices aren't matched with increased aid ability," he says. "That's where you have higher education only available to the few."

Dana Dratch is a freelance writer based in Atlanta.