Posted on: Monday, July 5, 2004
U.S. students paying less for college
| • | UH raising tuition 3 percent |
| • | Chart: Actual tuition cost declines |
By Dennis Cauchon
USA Today
What students pay on average for tuition at public universities has fallen by nearly one-third since 1998, thanks to new federal tax breaks and a massive increase in state and federal grants to most students and their families.
• HOPE Scholarship Tax Credit. Started in 1998, it reduces federal income taxes by up to $1,500 for every college student in a family. The full tax break is available for single people with adjusted gross income up to $41,000 and married couples with income up to $83,000. Partial credits are available for incomes up to $51,000 for single filers and $103,000 for married couples. The credit can be taken only for the first two years of college. • Lifetime Learning Tax Credit. Started in 1998, it reduces taxes by up to $2,000 per family. The income limits are the same as for the Hope tax credit. The Lifetime Learning Tax Credit can be taken an unlimited number of years. The Hope and Lifetime Learning credits cannot be taken in the same year, so taxpayers must compute which one saves them more. • Tuition tax deduction. Approved in 2001, it allows taxpayers to deduct up to $4,000 from taxable income this year for money spent on tuition and fees. The full deduction is available for single people earning up to $65,000 in adjusted gross income and married couples earning up to $130,000. Partial deductions are available for married couples earning up to $160,000. Government grants • Pell grants. Created in 1973, Pell grants provide money to needy college students. Maximum award: $4,050. The average income for families receiving Pell grants was $24,578 in 2003. Eligibility is based on a complex formula that considers family income and a school's tuition. • State aid. States awarded $6.9 billion in aid last year — an average of $467 per student. Requirements vary from state to state. The difference lies in a $22 billion annual increase in grants and tax breaks since 1998.
That 80 percent jump in financial aid — targeting middle-class families earning $40,000 to $100,000 a year — has more than offset dramatic hikes in tuition prices.
"College still takes a big chunk out of most families' income, but the average student is much better off today than headlines would have you believe," says Sandy Baum, an economist who co-wrote an annual report on college costs for the College Board, which oversees college entrance exams.
USA Today analyzed what students actually paid for tuition and fees after grants, discounts, tax credits and deductions. Other studies focus on the listed price of tuition.
But listed college tuition is like the sticker price on a new car: Few people actually pay it. In 2003, students paid an average of just 27 percent of the official tuition price at four-year public universities when grants and tax breaks are counted. Students at private universities paid an average of 57 percent.
Average tuition paid at public universities fell 32 percent from $1,636 in the 1997-1998 academic year to $1,115 in 2002-2003. During that time, the published tuition price rose 18 percent to an average of $4,202. About three-fourths of the nation's 12 million college students attend public institutions.
Total costs for tuition and room and board were flat at $6,794 at public schools from 1998 to 2003.
Average tuition paid at private universities rose 7 percent over five years to an average of $10,684 in 2003, less than the 20 percent increase in published tuition prices.
The USA Today analysis used figures from the College Board, the federal Office of Management and Budget and the Internal Revenue Service. All numbers were adjusted for inflation.
Congress has approved eight tax breaks for college education since 1997. Last year, these tax benefits saved families more than $7 billion. Key benefits:
The most affluent taxpayers — 1.5 percent of returns are for incomes above $200,000 — do not qualify for tax breaks, but many benefited from big increases in grants that reward academic performance. Schools have increased merit aid to recruit the best students, who tend to be affluent.
The poor have benefited from increases in federal Pell grants from $6 billion to $12 billion since 1998. Pell grants award money based on financial need.
But the biggest beneficiaries have been middle-class families earning $40,000 to $100,000 a year. They get most tax benefits and often qualify for financial aid based on both need and merit.
Contrary to the widespread perception that tuition is soaring out of control, a USA Today analysis found that what students actually pay in tuition and fees — rather than the published tuition price — has declined for a vast majority of students attending four-year public universities. In fact, today's students have enjoyed the greatest improvement in college affordability since the GI Bill provided benefits for returning World War II veterans.
Tax breaks
