The North Carolina legislature recently approved the UNC System Board's decision to hold tuition increases to five per cent (5%). The legislature also imposed a maximum of fifteen per cent (15%) aggregate financial aid from total tuition revenues. What does that mean for students and their parents?
First, the 5% cap is on tuition. At UNC campuses tuition is generally only about one quarter to one third of the cost of attendance. I have not read that there is a similar cap on the other charges room and board, and various fees that every student pays.
Furthermore, how much is your family's income growing annually? Is it by as much as 5% every year? It looks like NC public school teachers will receive something around a 7% salary increase. How long ago was their last increase in pay? How much longer will they wait for the next one? In the meantime their children face annual cost increases to attend college.
I cite teachers because, in my mind, they are representative of America's middle class -- hard-working; limited options to increase their earned income; many single mothers; struggling desperately to balance the family budget with sharp increases in food, utilities and gasoline.
Second, financial aid has been capped at 15% of revenue. For most of the system campuses that means approximately $1,100 - $1,200 per full-pay student per year. It is important to understand what those numbers mean. For every student paying full tuition the school has about eleven to twelve hundred dollars to offer other students in "scholarships."
Such financial aid is not necessarily need-based. Schools use their discretionary dollars to entice students they want enrolled. Therefore, a student with strong academics, coming from a six-figure-income family is as likely to be offered that thousand dollar grant as is a similarly strong student from a family with income of under $70,000.
Another fact is that a school's own, limited grant-in-aid money is in addition to other financial aid possibilities (e.g. Pell Grant, Federal Student Loan, private scholarships). Common practice is for individual colleges to offer their own, in-house, financial aid as a tuition discount. The significance of that bookkeeping maneuver is that no cash actually changes hands. It is merely a reduction in cost to the student, and a reduction of revenue to the school. Such reductions are real, and the schools have to budget for that. Those reductions do count against the 15% cap.
Conclusions:
- College costs continue to rise faster than middle-class family income, and faster than inflation (based on the Consumer Price Index).
- At public colleges, Financial Aid is a convoluted and politically charged arrangement, making a family's willingness to pay more important than ever.
- College selection remains the single-best strategy to minimize out-of-pocket costs for families.
- Private colleges continue to be a viable option due to their prerogatives regarding financial aid, linked primarily to their mission, endowments and annual costs.
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