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Education Statistics Quarterly
Vol 5, Issue 2, Topic: Featured Topic: Paying for College
Invited Commentary: Federal Efforts to Help Low-Income Students Pay for College
By: Sally L. Stroup, Assistant Secretary of Postsecondary Education, U.S. Department of Education
 
This commentary represents the opinions of the author and does not necessarily reflect the views of the National Center for Education Statistics.
 

How do low-income families pay for postsecondary education? This is a critical question to answer as we look to the upcoming reauthorization of the Higher Education Act (HEA). Through the HEA, the U.S. Department of Education will deliver or cause to be delivered more than $60 billion in financial aid—primarily to low-income students—during the 2003–04 academic year.

The National Center for Education Statistics (NCES) report How Families of Low- and Middle-Income Undergraduates Pay for College: Full-Time Dependent Students in 1999–2000 highlights the significant role that federal student financial aid programs play as the primary mode of support to low-income students enrolled in a public 2-year, public 4-year, or private not-for-profit 4-year college or university. It also highlights the fact that middle-income students' reliance on financial aid is greatest when they are attending 4-year institutions.

The report documents the fact that low-income students attending public 2-year colleges in 1999–2000 were able to meet their education expenses by combining federal grants with their earnings from work. Typically, they were also aided by their families by living at home while enrolled, and they borrowed little. Low-income students attending public 4-year colleges and universities, particularly those attending doctoral degree-granting universities, were likely to receive more grant support, including institutional grants, and to spend no more out-of-pocket than their peers at public 2-year colleges. They were, however, more likely to take out subsidized Stafford loans.

Three significant changes have occurred since 1999–2000:

  • The federal Pell Grant maximum award increased from $3,125 for the 1999–2000 academic year to $4,000 for the 2002–03 academic year—an increase of nearly 30 percent in just 4 years. This increase continued the trend begun in 1995–96.
  • The average tuition and fees charged by colleges and universities increased dramatically between 1999–2000 and 2002–03. The average tuition and fees charged by public 4-year colleges and universities increased by $720, or 22 percent, while the average tuition and fees charged by private 4-year colleges and universities increased by $2,800, or 18 percent. These increases offset the gains achieved by the federal investment of $4.4 billion in the Pell Grant Program for 2002–03—a 60 percent increase since 1999–2000.
  • Student loan interest rates have fallen to historic lows. Students leaving postsecondary education in the summer of 2000 were looking at entering repayment with interest rates of 7.72 percent on their subsidized Stafford loans. Students leaving postsecondary education today—in the summer of 2003—are facing interest rates of 3.42 percent. This reduction in the student loan interest rate will result in monthly savings of more than $20 on $10,000 in debt and 10-year savings of nearly $2,600.
Over the last several years, the federal government has been doing its part to reduce the economic barriers to low-income individuals enrolling in postsecondary education by substantially increasing funds for the Pell Grant Program and supporting policies that have reduced student loan costs to borrowers. However, despite these strong efforts, significant increases in tuition and fees continue to hamper the federal government's attempts to increase access to postsecondary education for many students from low-income families.

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