The Difference That 20 Years Makes In Financing A College Education
Posted on | February 7, 2010 | 1 Comment
I thought it would be interesting to see how much has changed since I finished college in 1989 (my apologies for this look back, I used to hate the "I remember when I was a kid" stories too). I
In particular, I thought I would analyze College Board data to see how college was financed then vs. how it is being paid for today. So what has changed over the past generation (figures below are in millions of constant (2008) dollars)?:
Percent of Total
| 1988-89 | 2008-09 | CAGR | 1988-89 | 2008-09 | |||
| Grants | |||||||
| Federal grants | $11,365 | $24,784 | 4.0% | 25% | 14% | ||
| State Grants | $2,934 | $8,492 | 5.5% | 6% | 5% | ||
| Institutional Grants | $7,390 | $31,160 | 7.5% | 16% | 17% | ||
| Private & Employer Grants |
$1,300 | $11,960 | 11.7% | 3% | 7% | ||
| TOTAL Grants | $22,989 | $76,395 | 6.2% | 50% | 42% | ||
| Loans | |||||||
| Non-Federal Loans | $0 | $11,900 | N/A | 0% | 7% | ||
| Federal loans | $21,698 | $83,981 | 7.0% | 47% | 47% | ||
| TOTAL Loans | $21,698 | $95,881 | 7.7% | 47% | 53% | ||
| Education Tax Benefits |
$0 | $6,830 | N/A | 0% | 4% | ||
| Federal Work-Study | $1,161 | $1,171 | 0.1% | 3% | 1% | ||
| TOTAL | $45,848 | $180,278 | 7.1% | 100% | 100% | ||
Note: CAGR is an acronym for compound annual growth rate.
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- Some insights:
- Overall, total aid used to finance post-secondary education grew by over 7% AFTER inflation, so assuming roughly 3% inflation over this period means that aid grew by 10% annually over a 20 year period. Some might see this as a good thing, but remember…
- Loans grew at a compound annual rate almost 8% over inflation and now
comprise 53% of total aid (not sure why loan is considered aid but anyway) for post-secondary education as compared to
47% in 1988-89. The increases in average student debt would seem to validate this analysis. - Despite growing at an annual rate 4.0% faster than inflation, federal
grants comprised only 14% of total aid in 2008-09 vs. 25% two decades
earlier. Whereas the ratio of federal loans to federal grants was
roughly 2:1 in 1988-89, it now stands at almost 3.5:1. In short, federal aid (even growing at inflation + 4%) couldn't keep up with spiraling increases in tuition and fees requiring students to take out more loans.
- Loans grew at a compound annual rate almost 8% over inflation and now
- Overall, total aid used to finance post-secondary education grew by over 7% AFTER inflation, so assuming roughly 3% inflation over this period means that aid grew by 10% annually over a 20 year period. Some might see this as a good thing, but remember…
- With the exception of Federal Work-Study (which grew almost exactly at the rate of inflation), all over aid categories grew significantly faster than the rate of inflation over this 20 year measurement period.
Anyone else want to share their observations?
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February 7th, 2010 @ 4:53 am
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