Financial aid is foremost in the minds of enrollment teams this fall. The early FAFSA shifted our schedules and transformed October from pre-season to prime time. This school year has had a busy start.
So I found there was something comforting about the release of the College Board’s annual reports last week. Both Trends in College Pricing and Trends in Student Aid once again quantitatively described what we who work with colleges on financial aid strategies have been seeing for a couple of years. These reports affirm what is familiar and forecast what may or may not be. A tried-and-true “go-to” source for many of us, the College Board studies provide an aggregate snapshot of the trajectories of college price and aid trend lines.
This year’s findings reinforce the anecdotes and stories we have been hearing from our clients and in conversations with school counselors, parents, and students, namely, these:
Further for-profit decline
The staggeringly dramatic demise of the for-profit sector in higher education—whether one sees that as a targeted attack by the federal government or a bad idea finally getting its due—is evident in the reports’ data. Enrollment in this sector has plummeted from 2.4 million in 2010-2011 to 240,000 in 2015-2016.
We also see parallel drops in loan volume, number of Pell recipients, and Pell dollars. Concurrently, institutional grants are going to assume a more prominent position—moving up to 55% of the resources used to fund undergraduate education.
Reluctance to borrow
The study also indicates both students and parents are increasingly resisting borrowing money to cover college costs. Contributing factors no doubt include continuing economic stagnation, higher-than-market federal interest rates, and aversion to debt, generally.
One wonders if in the 2016-2017 report we will see federal loan volume bounce back up in response to the lower, more market-reflective rates in effect as of July 1, 2016.
Increased competition, price sensitivity, tuition discounting
Prices are moderating, and discounting is increasing as a result of greater competition for shrinking pools of traditional-age students in major markets (applicant pools are growing only in populations of students that are underrepresented in higher education).
Coupled with flat wages, this increased competition for students leads to greater price sensitivity and triggers schools’ desire and need to discount tuition. The growth of discounting in the public sector cannot be ignored or dismissed as minimal. This sector is, after all, where 70% of undergraduates enroll—and discounting, especially for out-of-state students, grows ever higher.
Looking to the future, we see more of the same. Without a robust economic turnaround that restores families’ financial confidence and actual growth in earned income, we will continue to find aversion to loans (although the 3.76% direct rate may soften that attitude), moderate sticker price increases, and see climbing institutional discount rates, as well as more aggressive use of discounting in the public sector to lure lucrative nonresident students.
This “more of the same” will again be captured by the College Board studies next fall. Once again, results will no doubt reflect and shape our views on pricing and aid trends for subsequent years.
Like the changing of the October leaves, I look forward to—and appreciate—them.