College costs may spike with economy's slide

WASHINGTON -- College students and their parents should brace for sharp tuition increases and declining financial aid as the economic downturn begins to hit campuses across the country, higher-education officials and analysts said Wednesday.

The warnings came in response to the College Board's annual survey of tuition and fees, which showed relatively modest increases in the cost for the 2008-09 academic year, with costs rising 1 percent to 3 percent above inflation. But the report also was based on data collected before June and does not reflect the economic issues confronting the nation.

The report found tuition for the year climbed 6.4 percent for in-state students at public four-year institutions, to an average cost of $6,585. Private colleges jumped 5.9 percent to an average of $25,143. The cost of attending community colleges declined, after adjusting for inflation, by 0.8 percent to $2,300 for the year.

And with the economic downturn, the American Council on Education (ACE), a coalition of more than 1,600 college and university presidents, warned that conditions are ripe for some of the biggest tuition jumps in more than a decade.

State governments, struggling to balance budgets at a time of plummeting tax revenue, are beginning to slash appropriations to postsecondary institutions. Private schools are also being squeezed as their endowments wither in the stock market and donors grow more cautious, the group said.

At the University of Washington, 2008-09 tuition and fees amount to $6,802 for undergraduates who live in state, up 7 percent from the previous year. The Legislature has capped public universities' tuition increases at 7 percent a year, but lawmakers will likely be under pressure to revisit that during the next budget cycle.

And private schools here are being affected by the downturn, too: Seattle University recently said the stock market's plunge had subtracted 10 percent of its endowment, which is now about $200 million.

"I am concerned that we are entering a period ... when we will see a sharp spike in tuition prices at both public and private institutions," said ACE President Molly Corbett Broad in a statement. "Presidents and boards of trustees will be reluctant to increase tuition, but they will likely have little choice."

The report found that overall aid available to students, including grants and federal loans, increased for the year, particularly from public programs. Federal student loans jumped 6 percent, according to most recent available data. But the number of private loans for higher education, which had been climbing, began to shrink even before the current crisis.

While the tuition report, "Trends in College Pricing," covers this academic year's costs of college, "Trends in Student Aid" is based on the previous academic year's data.

Private loan volume declined slightly that year but represented almost a quarter of the total loan volume.

"In '07-'08, the full effect of the credit crunch wasn't evident, but it was starting, credit was getting tighter," said Sandy Baum, a senior policy analyst for the College Board and a Skidmore College professor. "We all expect that private loans will be down next year. More families are understanding that it makes sense to get all the government loans they can."

With worsening economic conditions, public and private institutions alike may cut back the "merit aid" offered to attract particular students -- often, those whose grades and test scores will improve their rankings -- and use that money on aid to needier students instead.

According to the report, public four-year institutions give only 44 percent of their aid dollars to students with financial need. On average, 38 percent of the public universities' aid goes to non-need-based merit aid and 18 percent to athletic scholarships.

Information from Seattle Times higher-education reporter Nick Perry and The New York Times is included in this report.