Increased federal aid, rise in tuition linked says to Federal Reserve report
September 1, 2015
A 2015 study by the Federal Reserve Bank of New York has found data suggesting a link between the amount of federal aid available to students and the rise in tuition, which, for the University, has risen by thousands over the past decade.
Mitch Dickey, Student Body President and senior in LAS, said he believes students are concerned about tuition rates, especially since the recession. Dickey said he thinks the loan availability in the past decade has opened up availability for students to take money, which could, in turn, have the negative effect of higher tuition rates.
“I would say that (the tuition rise) is definitely connected, especially when the direct loan and guaranteed loan program came out of the federal government,” Dickey said. “It just opened up a floodgate for students to really take on the debt and attend college wherever they wanted and that allowed University administrators to know that ‘Hey, the students are going to come, there’s demand for it, we can increase the costs and the demand will still be there.’”
The report focuses on three specific federal aid programs: Direct Subsidized Loans, Direct Unsubsidized Loans and Pell Grants. Each of the programs in the study raise the credit supply for University attendees to use to enroll.
According to the report, Pell Grants are awarded through institutions to low-income undergraduates. Direct Subsidized Loans are awarded based on need; the government pays the interest while the student is in school. Direct Unsubsidized Loans are not given based on need; they are given, “where the student is responsible for paying interest during all periods,” according to the report.
Of the three programs studied, Direct Subsidized Loans and Pell Grants were found to have generated 65 and 55 cent-on-the-dollar increases to college tuition, respectively, while the Direct Unsubsidized Loans were not found to have had a notable effect on price.
State aid to schools has been on the decline in recent years, and budget cut plans introduced by Gov. Bruce Rauner means the University could see $209 million cut from its budget.
Dan Mann, director of Student Financial Aid at the University, highlights the lack of state support as a factor in the rise of tuition in recent years.
“The state is no longer providing the same support as they have in the past and that’s been a big part of that decision making,” Mann said. “In recent years, the institution has been putting more grant money into financial aid packages in order to help us be a bit more competitive.”
Mann said the University mainly factors in how much money is needed to pay for the faculty, as well as how much the state can provide, among other things. He works to provide financial aid reports to the upper administration, but he said he does not believe they factor aid in when setting tuition.
According to the report, between 2001 and 2012, the average undergraduate student tuition almost doubled, going from $6,950 to more than $10,000; it corresponded to an average real rate increase of 3.5 percent per year.
Randy Kangas, associate vice president for Planning and Budgeting, deals with tuition setting at the University. He said they do not look at federal aid given to students when setting tuition.
Kangas said Planning and Budgeting looks at cost structure and the necessity of retaining faculty if there are certain unavoidable costs concerning utilities. He also said the academic programs are driven by state support.
“I understand the thought that there’s that correlation, but I’ve never heard that discussed other than the understanding that this is a lot of money for students and families and trying to do everything we can do to try and keep tuition rates down,” Kangas said.