Overview of Higher Education Finance

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Overview of Higher Education Finance

• NCHELP 2007 Legislative Conference
• Keeping Pace with a Changing Industry

Alisa Cunningham Vice President of Research and
Programs September 27, 2007
PRESENTED BY Institute for Higher Education Policy
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Institute for Higher Education Policy

• Independent, non-profit organization whose
  mission is to increase access and success in
  postsecondary education around the world through
  unique research and innovative programs.
• Key activities include research and evaluation,
  and programs.
• Work involves higher education policy at the U.S.
  federal, state, and institutional levels as well
  as international issues.
• Primary audiences for IHEP are those who make or
  inform decisions about higher education
  policymakers, senior institutional leaders,
  researchers, funders, private sector leaders, and
  the media.
• www.ihep.org

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Research and Evaluation

• National Policy StudiesFinancing, Special
  Populations, College Readiness
• State Policy StudiesStudent Aid, Access, Task
  Forces/Commissions
• Evaluation and Research Management
• InternationalFinancing, Capacity Building,
  Rankings

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Basic Realities of American Higher Education

• 16 million students are enrolled.
• 75 percent of undergraduate students are
  nontraditional, meaning they have at least one
  of the following characteristics not a high
  school graduate did not enroll in an institution
  of higher education directly after high school
  are attending part-time are working full-time
  or are financially independent, married, or have
  dependents.
• 60 percent of first-year undergraduate students
  (freshmen) attend either a community college (52
  percent) or a for-profit (proprietary) school (8
  percent).

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Basic Realities of American Higher Education,
Part 2

• About 5 percent of undergraduates attend a
  selective college or university (i.e., one that
  accepts less than half of those who apply).
  Nearly 50 percent of all students receive
  financial aid from one or more of the federal
  programs.
• One quarter of all four-year college students
  hold a full-time job 75 percent of all four-year
  students work.
• During their undergraduate years more than 60
  percent of students attend more than one
  institution of higher education.

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Top Issues

• Increasing tuition and fees
• Static or decreasing state appropriations
  (publics)
• Financial aid isnt keeping up
• Grants
• Loan limits
• Affordability issue net prices
• Alternative forms of financing
• Institutional aid/enrollment management
• Private loans
• Enrollment increasing, but unevenly

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Average Tuition and Fee Charges, in Constant
2006 Dollars
Source College Board, 2006. Enrollment weighted.
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• State general fund expenditures, 1987 and 2003

Note Aggregated across all 50 states. Source
Pattison 2004
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Total Student Aid Awarded in 2005-06, in
Billions
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Student loans, 2006-07

• Total student loans 68.6 billion
• Subsidized Stafford - 28.8 billion (34)
• Unsubsidized Stafford - 28.8 billion (34)
• PLUS - 9.7 billion (11)
• Nonfederal - 17.3 billion (20)

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Characteristics of Undergraduate Borrowers,
2003-04

• Federal loans
• 38 4-year public, 22 4-year private non-profit
  
• 66 full time
• 54 dependent
• 64 white, 17 black, 11 Hispanic
• 57 in lowest or 2nd income quartile
• Stafford subsidized loans
• 48 dependent
• 61 white, 19 black, 12 Hispanic
• 65 in lowest or 2nd income quartile
• Stafford unsubsidized loans
• 41 dependent
• 48 in lowest or 2nd income quartile

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• Grant Aid, 2006-07

• Total grant aid 59 billion
• Federal grant aid - 18.6 billion (31)
• Institutional aid - 24.4 billion (41)
• State aid - 6.8 billion (12)
• Private/employer grants - 9.2 billion (16)
• In 2005-06, undergraduates received 42 of their
  financial aid in the form of grants, compared to
  28 for grad students

Source College Board 2006
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Characteristics of Undergraduates who Receive
Grants, 2003-04

• Total grants
• 31 4-year public, 20 4-year private non-profit
  32 2-year public
• 57 full time
• 49 dependent
• 60 white, 18 black, 13 Hispanic
• 62 in lowest or 2nd income quartile
• Federal Pell Grants
• 29 4-year public, 14 4-year private non-profit
  34 2-year public
• 41 dependent
• 48 white, 25 black, 18 Hispanic
• 77 in lowest or 2nd income quartile
• Institutional grants
• 36 4-year public, 38 4-year private non-profit
  
• 70 full time
• 72 dependent
• 66 white, 12 black, 12 Hispanic
• 57 in lowest or 2nd income quartile

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• Maximum Pell Grant as a Percentage of Tuition,
  Fees, Room, and Board Charges at Public and
  Private Four-Year Institutions, 2005-06

Source College Board 2006
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• Trends in State and Institutional Grant Aid

• The volume of state grant aid has increased over
  time
• The proportion of aid not based on need has
  increased at a faster rate
• There is considerable variation by state
• Institutional grants have also increased
• Non-need aid also has increased at a faster
  rates, especially at low-price private
  institutions and publics
• Low-income students still generally receive more
  aid than higher income, but the gap has declined

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• Net Price (Total Charges After Average Grant and
  Education Tax Benefits), 2006-07

Source College Board 2006. Full-time
undergraduate students.
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Net College Prices as a Percent of Family Income
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Percentage Borrowing Private Loans
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Types of Private Loan Borrowers

• Undergraduate students
• Dependent undergraduates Traditional aged
  college students ages 18-24, usually enrolled in
  expensive institutions (private not profit),
  full-time, and tended to be middle- to
  upper-income.
• Independent undergraduates Also tended to be
  enrolled full-time at higher priced schools, but
  more often for-profits. Usually lower income.
  More often work full time.
• Both groups tend to have relatively high
  remaining need.
• Post-baccalaureate degree students
• Professional degree Like undergrads, face high
  prices and remaining need. Likely to be attending
  private colleges full time, without working. Tend
  to be lower-income.
• Graduate degree Similar pattern, but not to same
  extent.

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Federal Borrowing, Private Loan Borrowers 2003-04
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Reasons Students Borrow

• Students who take out private loans may do so in
  order to
• To attend higher priced institutions
• To take more classes
• To enroll full-time and work less while enrolled
• To fill gaps of remaining need, especially if
  maxed out on federal loans
• These reasons may differ for different types of
  students

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Demographic Trends

• Projections that the number of high school
  graduates will increase 10 between 2001-02 and
  2017-18
• Increasing proportion of graduates will be
  racial/ethnic minorities 40 in 2014 and low
  income
• Between 1995 and 2015, projected college
  enrollment increase is 19, again with increasing
  share of minority and low-income students
• However, high school grads will top out in
  2008-09 and then decline projections are that
  adult students will increase

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For More Information

• www.ihep.org