Student Financing of Undergraduate Education: 1992-93
Foreword
The National Postsecondary Student Aid Study of 1993 (NPSAS:93) is the third in a series of large-scale data collections on the topic of student financial aid and postsecondary education enrollments sponsored by the . The students included in NPSAS:93 were enrolled as either undergraduate or graduate students during the 1992-93 academic year. The two earlier versions of the NPSAS were carried out in 1987 (including students enrolled during the fall term in 1986) and in 1990 (including students enrolled in the 1989-90 academic year). These data sets are designed to enhance our understanding of the role of financial aid in financing postsecondary education, as well as to chronicle patterns of enrollment at the postsecondary level.
This essay is taken from a larger report entitled:
Student Financing of Undergraduate Education: 1992-93
(with an Essay on the Costs of Undergraduate Education Before and After Receipt of Financial Aid) NCES #95-202.
In addition to this essay on
the Costs of Undergraduates Education Before and After Student Financial Aid,
the larger report includes 48 tables in a compendia.
These tables are divided into four sections: student demographics, the cost of postsecondary education, the
distribution of financial aid, and the net costs of postsecondary education.
If you would like to download the full report you may click
here.
If you would like to receive a paper copy of this report, please e-mail Aurora D'Amico at
Aurora.D'Amico@ed.gov or
call (202) 502-7334. Alternatively, e-mail the NDRC at nedrc@pcci.com.
All estimates presented in the essay were produced using the NPSAS:93 Graduate Data Analysis System
(DAS). The DAS is a microcomputer application that allows users to specify and generate their own
tables from the NPSAS:93. This software system produces the design-adjusted standard errors necessary
for testing the stastical significance of differences shown in the tables.
The DAS software is also available for further analysis.
This essay was prepared by John Tuma and Sonya Geis of MPR Associates, Inc and Andrew G.
Malizio of NCES.
Table of Contents
List of Tables
Table
Essay Tables
List of Figures
Figures
1 Average student-reported tuition and fees and nontuition costs, by type of institution: 1992-93.
Financing Undergraduate Education: 1992-93
I. Introduction
Students and their families used various means to pay for postsecondary
education in 1992-93. What they paid from their own resources their net
costs varied with the type of institution attended and the receipt of student
financial aid.1 However, the price that students and their families paid for
postsecondary education had as much to do with decisions about where to
enroll, whether to attend full or part time, and whether to live on campus,
off campus, or with parents or other relatives as with the receipt of
financial aid. In many cases, the average differences in costs related to such
decisions in 1992-93 were greater than the average amount of financial aid
received. So while the effects of financial aid on the cost of undergraduate
education in 1992-93 are examined here, ways in which the price of enrollment
is shaped through decisions made by students and their families are examined
first.
What Is Net Cost and How Is It Measured?
Before discussing how price varies with the decisions made by students, it
will be useful to explore what is meant by net cost. Net cost usually refers
to that portion of total costs that students and their families pay from their
own resources after receipt of financial aid. Total costs include tuition and
fees, room and board, books and supplies, and other (which includes such
things as transportation and entertainment).2 Analyses of the cost of
postsecondary education typically focus on net cost rather than total cost,
because it is the amount that students and their families must finance out of
their own income, savings, or other assets that is likely to have the greatest
impact on their educational decisions.
This emphasis on net cost derives from the two main goals of the student
financial aid system: to increase access to postsecondary education by
eliminating financial barriers to entry, and to increase the number of
institutional choices a student has by reducing the direct cost of attendance.
A third goal, persistence in postsecondary education, is often added to this
list, since neither choice nor access count for much if students cannot afford
to persist in their education. In order to accomplish these goals, most
financial aid is awarded on the basis of financial need. Financial need is
defined by formula, which takes into account the income and assets of students
and their families, the estimated total cost of postsecondary education, and a
variety of special factors such as the number of siblings in college.3 In
these need analyses, students' enrollment and living arrangement decisions are
often taken as given, mostly because aid eligibility cannot be determined
until these decisions have been made. Once made, however, total estimated
costs are fixed, and the student's financial needs can be evaluated. Net
costs the amount that students and their families actually pay from their own
resources can then be defined as the total cost of enrollment less any
financial aid received.
However, there are any number of ways to calculate the value of a financial aid award, and how this is done has a big impact on net costs.4 When aid is awarded, its value is simply the sum of all the aid delivered to the student. This makes sense since the purpose of financial aid is to reduce the current direct cost of attendance so that cost alone does not prevent entry into postsecondary education nor preclude enrollment at the student's first-choice institution. When valued as the sum of all aid awarded, financial aid more or less equalized net costs among independent students at all income levels, and among dependent students whose parents had incomes up to about $50,000. These results were achieved because students with lower incomes or from lower income families received more financial aid, on average, than students with higher incomes or from higher income families.
While valuing financial aid as the sum of all aid delivered to the student
may make sense when the goal is to equalize the current direct cost of
attendance, there is considerable debate about the real impact of financial
aid in reducing total costs. The reason is that different types of aid affect
the total amount that students or their families will actually pay for
education in different ways. For example, grants reduce the cost of attendance
in absolute terms. Student loans, by contrast, defer the cost of attendance
until the student leaves postsecondary education. However, since loans are
generally subsidized by the federal government, the value of loans is often
set at the average value of the subsidy, which is estimated to be between 20
and 40 percent of the face value of the loan.5 Work-study neither reduces the
costs of attendance nor defers them, but instead enables the student to defray
the costs through higher levels of current income. When net costs are measured
as total costs less only grant aid, net costs are higher than when all aid is
taken into account; however, the effects of excluding loans and work-study are
most apparent among lower income students because of their greater dependence
on financial aid of all types.
These findings show that financial aid is clearly important in reducing
the price of postsecondary education to students and their families,
particularly among those from lower income backgrounds. However, one problem
with narrowly focusing on the effects of financial aid is that it deflects
attention from the ways in which students and their families shape the costs
that they incur, whether or not they receive financial aid. Three-fifths of
all students enrolled in 1992-93 did not receive any financial aid; they
financed their education completely from their own or their family's
resources. For this group, net costs were the same as total costs because
there was no financial aid to net out. Even among students who did receive
financial aid, more than half of the total cost was paid, on average, from the
student's or the student's family's own resources.
The next section explores how the price of postsecondary education varied with the type of institution attended, and how prices varied within institutions by students' enrollment status and living arrangements. In the third section, the focus turns to the distribution of financial aid and the average amount of aid undergraduates received. The fourth section looks at the net price of postsecondary education at each institution type, and explores how net price varied by family or student income and by financial aid status. Finally, the last section summarizes the findings and conclusions of this essay.
II. Average Costs of Postsecondary Education by Institution Type in 1992-93
The average cost of postsecondary education varied with the type of
institution the student attended. In general, institutions that offered longer
term programs were more costly than institutions that offered only shorter
term programs, and private institutions were generally more costly than public
institutions that offered programs of similar length.6 Because of the strong
correlation between the type of institution a student attended and the costs
that the student incurred, this essay focuses on the cost differences among
the four largest institution types: public 2-year, with 43 percent of all
postsecondary enrollments in 1992-93; public 4-year, with 31 percent of all
postsecondary enrollments; private, not-for-profit 4-year, with 14 percent of
all enrollments; and private, for-profit, with 8 percent of all enrollments.7
Since other institution types public less-than-2-year, and private, not-for-profit less-than-4-year each accounted for less than 2 percent of all postsecondary enrollments in 1992-93, they are not examined separately in this
essay. The students in these institutions are included in the aggregate
categories (such as "all students"), and these institution types are examined
separately in the table compendium following the essay.8
The average attendance-adjusted total price incurred by undergraduates before receiving financial aid in 1992-93 was $8,192, but the average costs incurred by students varied widely across the different institution types (figure 1).9 For example, students who were enrolled in public 4-year institutions incurred considerably lower costs than did students enrolled in private, not-for-profit 4-year institutions. Students in public 2-year institutions incurred lower costs on average than did students in the other institution types. Thus, the institution type that students attended had a big impact on the total price of their postsecondary education.
NOTE: The average total cost, nontuition cost, and tuition and fee data were
restricted to the sample of students for whom net cost data were nonzero and
nonmissing so that total costs less financial aid will equal net costs.
SOURCE: U.S. Department of Education, National Center for Education
Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93),
Undergraduate Data Analysis System.
Tuition and fees accounted for most of the variation in the total price of
postsecondary education at the different institution types, ranging from an
average of $597 at public 2-year institutions to more than $8,000 at private,
not-for-profit institutions (figure 1). Nontuition costs, by contrast, were
about the same at 4-year institutions and at private, for-profit institutions;
nontuition costs were somewhat lower at public 2-year institutions, primarily
because many of the students at these institutions were enrolled part time.
The prevalence of part-time students had a big impact on the average cost
of attendance in the different institution types in 1992-93. Part-time
students paid less in tuition and fees than did full-time students, and only
part of their living expenses were included here in the calculation of total
costs.10 Because only about 15 percent of all students in public 2-year
institutions were enrolled fulltime for the entire year, compared to 50
percent in public 4-year institutions, 54 percent in private, not-for-profit
4-year institutions, and 75 percent in private, for-profit institutions (table
1.1 in the compendium), the effects of part-time and full-time enrollment
patterns on average costs varied by type of institution.11
Because total average costs and tuition and fees varied with enrollment
patterns, grouping students by enrollment status at the different institution
types has a big impact on the average cost figures (table 1). For instance,
when full-time and part-time students are grouped separately, most of the
differences in costs between students enrolled in public 2-year and
Private, not-
All Public Public for-profit Private,
students 2-year 4-year 4-year for-profit
Total costs
Total $8,192 $5,221 $8,904 $14,729 $11,062
Full-time, full-year 13,024 9,437 11,115 19,549 15,021
Full-time, part-year 7,624 5,175 6,854 11,330 9,558
Part-time, full-year 7,643 6,446 8,560 10,938 12,290
Part-time, part-year 3,242 2,715 3,890 4,838 6,565
Tuition and fees
Total 2,503 597 2,290 8,015 4,675
Full-time, full-year 4,806 1,282 3,044 11,339 5,831
Full-time, part-year 2,728 644 2,060 6,067 4,341
Part-time, full-year 1,436 652 1,711 4,498 4,669
Part-time, part-year 611 292 810 1,794 2,998
Nontuition costs
Total 5,689 4,624 6,614 6,714 6,387
Full-time, full-year 8,218 8,154 8,071 8,210 9,190
Full-time, part-year 4,897 4,531 4,794 5,263 5,217
Part-time, full-year 6,207 5,794 6,849 6,439 7,621
Part-time, part-year 2,632 2,423 3,080 3,044 3,567
NOTE: The average total cost and tuition and fee estimates have been
restricted to the sample of students whose net costs were nonzero and
nonmissing so that total costs less financial aid will equal net costs.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
public 4-year institutions disappear. On average, students in public 4-year institutions incurred total costs of $8,904 in 1992-93, compared to an average of $5,221 among students in public 2-year institutions. Among full-time, full-year undergraduates, those in public 4-year institutions incurred costs of $11,115, compared to $9,437 among those in public 2-year institutions. Furthermore, this difference is entirely due to the difference in average tuition and fees at these institutions, which were $3,044 at the 4-year institutions and $1,282 at the 2-year institutions in 1992-93. Among students with similar patterns of enrollment at public 2-year and 4-year institutions, nontuition costs were about the same.
Within each institution type, the price of part-time enrollment was
substantially less than the price of full-time enrollment. In 4-year private,
not-for-profit institutions, students enrolled part time for the full year
incurred average costs of $10,938, substantially less than the $19,549
incurred, on average, by their full-time, full-year counterparts. Similarly,
average costs among part-time students in 4-year public institutions were
$8,560, compared to $11,115 among full-time students in those institutions.
Hence, the current costs that students incur are directly related to the
decision to enroll full time or part time.12
Like enrollment status, the location of a student's residence had a
substantial impact on the total price of their education (table 2). Full-time,
full-year students who lived on campus incurred about the same costs, on
average, as students who lived off campus, while the average costs incurred by
students who were living with their parents were considerably less. Moreover,
the differences in average costs between students who were living with their
parents and those who were living on campus were quite large. For example,
average costs among students enrolled in private, not-for-profit 4-year
institutions were $20,401 for those who lived on campus, compared to $15,464
for those who lived with their parents. Similarly, part-time or part-year
undergraduate students who lived on campus had substantially higher costs than
did those who lived with their parents.13
Table 2 Average total costs of postsecondary education, by attendance status, location of residence, and type of institution: 1992-93
Private, not-
All Public Public for-profit Private
students 2-year 4-year 4-year for-profit
Total $8,192 $5,221 $8,904 $14,729 $11,062
Full-time undergraduates
On campus 14,990 9,599 10,640 20,401 16,460
Off campus 14,127 12,400 12,381 20,335 17,185
With parents 9,109 6,919 8,248 15,464 11,303
Part-time or part-year undergraduates
On campus 9,269 6,360 8,085 13,188 10,153
Off campus 6,030 4,750 6,968 8,386 10,060
With parents 4,553 3,705 5,041 7,606 7,589
NOTE: The average total cost estimates have been restricted to the sample of
students whose net costs were nonzero and nonmissing so that total costs less
financial aid will equal net costs.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
These price comparisons emphasize the differences between those who lived
on campus and those who lived with their parents because both groups were
predominantly dependent students, while those who lived off campus were more
likely to be independent (table 1.1 in the compendium).14 The distinction
between dependent and independent students is important because the share of
total costs accounted for by tuition and fees and by nontuition costs varied
with dependency status (table 3). In general, dependent students were more
likely to be enrolled full time, and therefore incurred higher average tuition
and fees than independent students. Nontuition costs were highest, on average,
among independent students with dependents, a difference that reflects the
wider range of housing options available to single dependent and independent
students than to those who have other family members to consider.
Private, not-
All Public Public for-profit Private,
students 2-year 4-year 4-year for-profit
Total $8,192 $5,221 $8,904 $14,729 $11,062
Total costs
Dependent 9,133 5,077 9,031 17,258 10,133
Independent,
no dependents 7,054 4,740 8,239 11,472 10,809
with dependents
7,524 5,618 9,114 10,458 11,763
Tuition and fees
Dependent 3,548 799 2,722 10,494 5,124
Independent,
no dependents 1,792 510 1,773 5,329 4,581
with dependents
1,411 460 1,375 3,461 4,442
Nontuition costs
Dependent 5,585 4,278 6,309 6,764 5,009
Independent,
no dependents 5,262 4,230 6,466 6,143 6,228
with dependents
6,113 5,159 7,739 6,997 7,321
NOTE: The average total cost estimates have been restricted to the sample of
students whose net costs were nonzero and nonmissing so that total costs less
financial aid will equal net costs.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
Although the cost comparisons could be further refined by looking at the overlapping effects of dependency status, enrollment status, and living arrangements, doing so will not alter the basic findings reported here.15 The total average price of undergraduate postsecondary education was highest among students in private, not-for-profit 4-year institutions, followed by those in private, for-profit institutions, and public 4-year institutions. The total average price was lowest among those in public 2-year institutions. This price ranking primarily reflects differences in tuition and fees, since nontuition costs varied little among the institutions. Within each institution type, part-time students faced significantly lower total costs than did students who were enrolled full time. Likewise, students who lived with their parents incurred lower costs, on average, than did students enrolled at the same institution type who lived either on or off campus.
III. Receipt of Financial Aid by Institution Type in 1992 93
The goals of student financial aid are to promote access, enhance choice,
and improve persistence in postsecondary education by reducing the current
direct cost of attendance incurred by students. And though the different types
of aid have different effects on the price that students actually pay, the
current net cost of attendance is less than it otherwise would have been when
the student receives any type of student financial aid.
Although many postsecondary institutions award nonneed-based financial
aid academic or athletic scholarships, for example most student financial aid
is awarded on the basis of economic need.16 Need is defined in relation to
total costs and to family income and assets; as a result, receipt of financial
aid generally follows the pattern of total average costs by type of
institution. In institution types where the average costs are low, relatively
few students receive financial aid, and those who do receive relatively small
amounts. Where costs are high, a larger percentage of students receive aid,
and in somewhat larger amounts.
Overall, about 4 of 10 undergraduates received some type of student
financial aid in 1992-93. However, the percentage of students receiving aid in
the different institution types varied widely (table 4), ranging from about 27
percent of students enrolled in public 2-year
Private, not-
All Public Public for-profit Private,
students 2-year 4-year 4-year for-profit
Percent of students
receiving any aid 41.4 27.1 45.6 60.6 71.8
Average amount of aid $3,953 1,854 $3,785 $7,125 $4,100
Percent of students
receiving grants 34.6 24.0 36.1 53.8 54.1
Average amount of grants 2,449 1,325 2,191 4,709 1,960
Percent of students
receiving any loans 19.8 6.5 25.1 35.8 45.9
Average amount of loans 3,170 2,246 2,959 3,728 3,479
Percent of students
receiving any work-study 4.8 1.5 5.7 15.6 1.2
Average amount of work-study
1,327 1,494 1,306 1,261 2,291
NOTES: Average aid amounts are for aided students only. The average amounts
reported here vary slightly from those shown in the data compendium because
the aided sample has been restricted here to students for whom net cost data
are available so that total costs less financial aid will equal net costs.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
institutions to about 72 percent of students in private, for-profit
institutions. About 35 percent of all undergraduates received a grant; about
20 percent received a loan; and about 5 percent received some type of work-study.17
Like the percentage of students receiving aid, the composition of financial aid also varied by type of institution.18
On average, aid recipients received about $3,953 in 1992-93, but once
again, the amount of aid received by undergraduates in the different
institution types varied greatly.19 Aided undergraduates at public 2-year
institutions received an average of $1,854 in 1992 93, compared to about
$3,785 for those in public 4-year institutions, $4,100 for those in private,
for-profit institution received $1,960, while grant recipients in private, not-for-profit 4-year institutions received $4,709.
20
IV. Net Costs of Postsecondary Education by Type of Institution in 1992-93
Net Cost by Family and Student Income
Although financial aid is important for many students, responsibility for
paying the costs of postsecondary education falls first on students and their
families. In 1992-93, the Congressional Methodology established the minimum
contribution that a student or the student's family had to provide before
financial aid could be offered.21 In cases where the student's costs were less
than the expected family contribution, the student was not eligible for need-based aid. Where costs were higher than the expected family contri
work-study) up to the amount of the difference between costs and the expected
contribution.
The primacy of the student's and the student's family's resources is
illustrated in figures 2a and 2b, which display average total costs of
attendance, average amount of financial aid received, and average net costs of
attendance by family or student income.22 At every income level, what students
and their families paid out of their own resources on average (their net
costs) was greater than the average amount of financial aid students
received.23
NOTE: Net cost is defined as total costs less all financial aid. The sample
was restricted to students whose net costs were nonzero and nonmissing.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
NOTE: Net cost is defined as total cost less all financial aid. The sample was
restricted to students whose net costs were nonzero and nonmissing.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
Among both dependent and independent undergraduates, the amount of
financial aid received was closely tied to income: as income rose, the average
amount of financial aid received by students declined. Among dependent
students, both total average costs and average net costs generally rose with
income (reflecting the greater probability of full-time, full-year enrollment
among higher income undergraduates, their tendency to enroll in more costly
institutions, and their lower likelihood of receiving financial aid). By
contrast, average net costs did not vary much with income among independent
undergraduates. However, the lack of variation in net costs among independent
students largely reflects the lower average costs among higher income
independent undergraduates, who were predominantly enrolled less than full
time in 1992-93.
An interesting feature of the data displayed in figures 2a and 2b is that
financial aid substantially reduced the variability in net costs among
independent students, and among dependent students whose parents had incomes
up to about $50,000. These results were achieved, in part, because students
with lower incomes or from lower income families received more financial aid,
on average, than did their higher income peers.24 At the same time, however,
some students from higher income families were able to get financial aid,
presumably because the cost of attending the institution of their choice was
high, or their family circumstances were unusual (such as having several
family members in postsecondary education at the same time).
Net Costs by Income and Type of Institution
A more detailed look at net costs by family or student income and
institution type shows that net costs increased with income among dependent
students (because the expected family contribution increased with income),
regardless of the type of institution attended (table 5). Hence, the apparent
equalizing effects of financial aid among dependent students from families
with incomes under $50,000, as shown in figure 2a, reflects not only the
effects of financial aid but also the income distribution of students across
institution types. Although net costs did not rise steeply among students from
families with incomes under $50,000, they still trended upward with income,
except at public 2-year institutions.
Private, not -
All Public Public for-profit Private,
students 2-year 4-year 4-year for-profit
Family or student income level
Less than $10,000 $5,316 $4,763 $5,108 $6,593 $5,790
$10,000 $19,999 5,149 4,222 5,432 6,422 6,213
$20,000 $29,999 5,913 4,775 5,981 7,835 6,134
$30,000 $39,999 5,971 4,060 6,724 9,965 7,924
$40,000 $49,999 5,629 4,269 6,471 9,091 7,927
$50,000 $59,999 7,732 5,593 7,643 11,178 10,964
$60,000 $69,999 9,601 5,202 8,879 14,747 7,622
$70,000 $79,999 10,264 5,138 8,505 16,310 _
$80,000 $99,999 9,484 5,195 8,925 15,671 _
$100,000 or more 11,646 5,850 10,265 17,907 _
Indicates too few cases for a reliable estimate.
NOTES: Net cost is defined as total costs less all financial aid. The sample
for this table includes only those students whose net costs were nonzero and
nonmissing.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
Figure 3 contrasts average total costs with average net costs for dependent students in public 4-year and private, not-for-profit 4-year institutions by family income. This graph shows that the net cost curve for students in both institutions rose more steeply than the corresponding total cost curve. In other words, the net effects of financial aid were greater for students from lower income families than for students from higher income families at both institution types. Similar effects were evident at the other types of institutions as well.
NOTE: Net cost is defined as total costs less all financial aid. The sample
was restricted to students whose net costs were nonzero and nonmissing.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
Among independent students, net costs declined as income increased for those enrolled in public 2-year institutions, again because most higher income students were enrolled part time (table 6). Net costs did not vary with income among independent students enrolled in private, not-for profit 4-year institutions, but they did increase with income among those at 4-year public and private, not-for-profit institutions.
Private, not-
All Public Public for-profit Private,
students 2-year 4-year 4-year for-profit
Student income level
Less than $5,000 $6,036 $4,783 $5,676 $7,868 $7,489
$5,000 $9,999 6,254 5,121 6,300 8,465 7,905
$10,000 $19,999 6,212 4,937 7,160 7,968 8,408
$20,000 $29,999 5,827 4,715 6,912 8,232 8,388
$30,000 $49,999 5,857 4,441 7,534 7,922 10,712
NOTE: Net cost is defined as total costs less all financial aid. The sample
for this table includes only those students whose net costs were nonzero and
nonmissing.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
Thus far, net costs have been defined as total costs less total financial
aid; however, there are many different ways net costs can be defined,
depending upon what is being measured. For example, one might look at net
costs as a measure of the total financial effort that students (and their
families) make when paying for postsecondary education. In this case, it may
make sense to calculate net costs by taking only grant aid into consideration
(since this is the only type of aid that requires neither work nor repayment).
When net costs are defined as total costs less only grant aid received, net costs still increase with income among dependent students at each type of institution (table 7). But as one would expect given the data on the distribution of loan or work-study aid, the relative effects of excluding these aid types on net costs vary by type of institution. For example, net costs change very little at public 2-year institutions when loan and work-study aid are excluded, while the effects are more pronounced at the especially large among dependent students from lower income families because of their greater reliance on financial aid.
Private, not-
All Public Public for-profit Private,
students 2-year 4-year 4-year for-profit
Family or student income level
Dependent students
Less than $10,000 $6,287 $4,769 $6,349 $8,474 $6,978
$10,000 $19,999 6,123 4,269 6,619 8,694 8,242
$20,000 $29,999 7,060 4,935 7,137 10,559 8,625
$30,000 $39,999 6,997 4,237 7,893 12,576 10,064
$40,000 $49,999 6,418 4,360 7,440 12,102 10,394
$50,000 $59,999 8,410 5,676 8,174 13,196 12,319
$60,000 $69,999 10,253 5,317 9,281 16,116 10,324
$70,000 $79,999 10,919 5,099 9,033 17,516 _
$80,000 $99,999 10,073 5,254 9,326 17,120 _
$100,000 or more 11,972 5,862 10,575 18,452 _
Independent students
Less than $5,000 7,229 5,217 7,256 10,091 8,869
$5,000 $9,999 7,367 5,479 7,849 10,734 9,725
$10,000 $19,999 6,973 5,185 7,565 9,190 10,166
$30,000 $49,999 6,199 4,819 7,897 8,543 11,993
$50,000 or more 6,060 4,468 7,629 8,521 12,095
Indicates too few cases for a reliable estimate.
NOTES: Net cost is defined in this table as total costs less grant aid only;
loan and work-study aid are excluded. The sample for this table includes only
those students whose net costs were nonzero and nonmissing.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
The effects of excluding loans and work-study are also large among
independent students. For example, net costs do not vary among independent
students at private, not-for-profit 4-year institutions when all types of aid
are included; however, when aid is restricted to grants, net costs decline
with increases in income among these students. Net costs are positively
associated with increases in income at 4-year public institutions when all
types of aid are included in the net cost calculation, but they do not vary
when only grants are considered. Again, lower income students are more reliant
on loan and work-study aid, and when these discretionary forms of aid are
excluded from the net cost calculation, their net costs rise relative to the
net costs of students with higher incomes.
Net Costs Among Aided and Nonaided Students
Once financial aid is taken into account, how do the net costs of education compare among aided and nonaided undergraduates? Table 8 shows both average total costs and average net costs for aided and nonaided undergraduates. Note that the average net costs for nonaided students are the same as total average costs (since there is no aid to "net" out), while net costs among aided students are defined here as total costs minus total financial aid.
Private, not-
All Public Public for-profit Private,
students 2-year 4-year 4-year for-profit
Aided students
Total costs $10,725 $7,411 $10,070 $15,885 $11,650
Total aid received 3,953 1,854 3,785 7,125 4,100
Net costs 6,772 5,558 6,284 8,759 7,550
Nonaided students
Total and net costs 6,537 4,475 8,008 13,061 9,641
All students
Net costs 6,630 4,750 7,259 10,520 8,161
NOTE: The student sample for this table has been restricted to those students
whose net costs were nonzero and nonmissing so that total costs less financial
aid will equal net costs.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1993 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
In 1992-93, average total costs were higher among aided than nonaided
undergraduates, mainly because a large majority of full-time, full-year
students (the most costly enrollment pattern) received some type of financial
aid. In other words, the difference in total costs is largely due to the
different enrollment patterns of aided and nonaided students.25 Once financial
aid is taken into account, average net costs were similar for both aided
($6,772) and nonaided ($6,537) undergraduates. However, this pattern varied by
type of institution. For example, aided students had higher net costs than
nonaided students at public 2-year institutions (because full-time, full-year
students were more likely than part-time or part-year students to receive
aid), while aided students had lower average net costs at the other three
institution types.26
When net cost is defined as total cost less only grant aid, the net cost patterns for aided and nonaided students change substantially. Figure 4 displays average net costs for aided and nonaided students, excluding all forms of financial aid except grants. With the exception of private, not-for-profit 4-year institutions, where net costs remained higher among nonaided students when loans and work-study were not considered. Thus, aided students reduced their net costs below those of nonaided students by taking out loans or by working. These same options (less the federal subsidy) are also available to students who are not eligible for financial aid.
NOTE: The sample was restricted to students whose net costs were nonzero and
nonmissing.
SOURCE: U.S. Department of Education, National Center for Education Statistics, 1992-93 National Postsecondary Student Aid Study (NPSAS:93), Undergraduate Data Analysis System.
One puzzling question that is raised by these net cost comparisons is why net costs are more or less the same among aided and nonaided students enrolled in the same type of institution.27 There is no obvious reason why these results would occur, and other things equal, one would expect nonaided students to have higher average net costs than aided students who are enrolled in the same type of institution. One plausible explanation, which is consistent with the findings of this study, is that students alter their behavior, seek financial aid, or do both, so that they can attend an institution that is consistent with their degree objectives and their willingness to pay. By this reasoning, net cost reflects the upper bounds of what students enrolled in each institution type are willing to pay; if they are willing to pay more, they choose to attend a more costly institution, enroll full time, or live away from home.
V. Conclusions
Discussions about the net cost of postsecondary education often revolve
around student financial aid, primarily because enhancing access, choice, and
persistence by reducing the net cost to students are the main goals of student
financial aid. However, three-fifths of all undergraduates did not receive any
financial aid in 1992-93, and among the two-fifths of undergraduates who did
receive financial aid, the average amount of aid received was considerably
less than half of the average total costs they incurred. Hence, most
postsecondary costs were financed out of the resources of students and their
families, and narrowly focusing on the effects of financial aid without
considering the effects of students' decisions about where to enroll, whether
to attend full time or part time, and whether to live on campus, off campus,
or with parents or other relatives, ignores some of important ways in which
students shape the net costs that they incur.
One important finding is that student financial aid reduced the
variability of net costs among independent students at all income levels, and
among dependent students whose parents had incomes up to about $50,000. This
occurred because students with lower incomes or from lower income families
received more financial aid, on average, than did students with higher incomes
or from higher income families. However, a closer look at net costs by both
income and type of institution shows that while financial aid reduced the
average costs incurred by students in each institution type, net costs
increased with income among dependent students, regardless of the type of
institution attended. Hence, the apparent equalizing effects of financial aid
among dependent students from families with incomes under $50,000 reflects not
only the effects of financial aid but also the income distribution of students
in the various institution types.
Among both dependent and independent students, those with lower incomes
or from lower income backgrounds were more dependent on student financial aid
than were higher income students and students from higher income backgrounds.
Moreover, lower income students were substantially more dependent upon loans
and work-study aid than their higher income peers.
Finally, the comparison of net costs among aided and nonaided students
raises an interesting question: Why are the average net costs of these
different groups about the same when they attend similar institutions? One
interpretation is that net costs represent the upper bounds of what students
who enroll in a particular type of institution are willing to pay. If this is
right, one would expect to find that aided and nonaided students exhibited
different enrollment behaviors; otherwise, nonaided students would have higher
average net costs than aided students. In fact, aided undergraduates were more
likely than nonaided undergraduates to be full-time, full-year students, while
nonaided undergraduates were more likely than aided undergraduates to be part-time or part-year students. At the same time, the fact that recei
the importance of financial aid. Thus, what students and their families
ultimately pay for undergraduate education their net costs reflects not only
the receipt of financial aid but also the institutions, attendance patterns,
and living arrangements they choose.
Footnotes
1. The terms price and cost are used interchangeably throughout this essay, although price is
the more accurate term. This distinction is important because students rarely pay the full costs
of providing a given set of educational services (except, perhaps, in the private, for-profit
institutions), whether or not they receive financial aid. Thus, the focus here is on the price
paid or the costs incurred, not on how much it actually costs to provide a given set of
educational services, or on how much they should cost. See Howard R. Bowen, The Costs of
Higher Education: How Much Do Colleges and Universities Spend Per Student and How
Much Should They Spend? (San Francisco, CA: Jossey-Bass, Inc., 1980), 17 18.
2. The cost figures presented in this report are student-reported costs. See the technical notes
in appendix B for more information about different cost measurement methods.
3. The Congressional Methodology formula was the formula used for determining need in
1992 93. Financial need by this formula was defined as the estimated cost of attendance at a
particular institution minus the expected family contribution (EFC). The EFC was determined
by the formula, and included adjustments for the student s financial dependency status, the
number of siblings or dependents in college, the student s income and assets, and among
financially dependent students, the parents income and assets. With few exceptions, it was
only when the cost of attendance was higher than the EFC that the student was eligible for
need-based financial aid. As mandated by the Higher Education Amendments of 1992, the
EFC is now produced using a needs-analysis formula known as the Federal Needs Analysis
Methodology. For more information on how the EFC is calculated, see the expected family
contribution (EFC) formulas, 1995 96. A copy of the formulas can be obtained by calling the
Federal Student Aid Information Center at 1-800-4-FED-AID.
4. For example, the NPSAS:93 Data Analysis System contains 11 net cost variables, which
value aid or costs in different ways and are used to support different types of analyses.
5. The estimated value of loans is derived from Congressional Budget Office, Student Aid
and the Cost of Postsecondary Education (Washington, DC, January 1991), 55.
6. Public-sector institutions were less costly to the student than private-sector institutions
because the former are generally heavily subsidized by the states.
7. The private, for-profit category includes institutions offering less-than-2-year programs, 2-
year programs, and/or 4-year or longer programs.
8. The distribution of students among the various institution types has a big impact on the
average values reported in this essay and are, therefore, important in interpreting the data
presented here.
9. Costs were adjusted to reflect students attendance status. For example, in months that
students were enrolled full time, all of the living costs that they reported were included
(except for married independent students). In months when they were enrolled less than full
time, living expenses for students who were living off campus were reduced to reflect that.
10. See compendium tables 2.1b and 2.1c for more detail on the cost differences between
full-time, full-year and part-time or part-year students. Detailed comparisons of full-time, full-
year and part-time or part-year tuition and fees are in compendium tables 2.2b and 2.2c.
11. The percentage of students enrolled full time at the private, for-profit institutions
includes those who were enrolled for less than 9 months, since many of these institutions
offer short-term programs.
12. The decision to enroll part time may reduce current costs, but may not reduce the total
costs incurred to degree completion (among those who plan to get a degree), since enrolling
part time also extends the total length of time students will take to earn their degree.
13. The part-time or part-year designation is misleading in the case of students in private,
for-profit institutions. Many of these students were enrolled full time for only part of the year,
but the full term for their program was less than a full academic year. Hence, the costs
incurred by this group are not directly comparable to the costs incurred by part-time or part-
year students in the other institution types.
14. Dependency status as defined in federal regulations at the time of the NPSAS:93 survey
specified that students 24 years of age or older would be considered financially independent,
regardless of their actual financial relationship to their families. Students younger than 24
could also be independent, but only if they could prove they were financially independent of
their parents or met any of the other six conditions described in appendix A. This distinction
is important for financial aid purposes, because the aid eligibility of dependent students is
calculated by taking both parents and students assets and income into account, while
independent students must report only their own income and assets.
15. A detailed exploration of the complex interactions between financial aid programs,
student and family resources, and student choices is beyond the scope of this brief essay. A
number of interactions are hinted at in the data reported here, however. For example, receipt
of aid and intensity of enrollment are clearly linked, primarily because students must have
been enrolled at least half time to be eligible for some financial aid programs. Likewise,
educational expenditures and institutional choices appear to be related to family economic
circumstances, but how much of an impact financial aid has on expenditures and choice
cannot be determined with the data developed for this report.
16. A more complete description of student financial aid programs is presented in the
technical notes.
17. Many students received more than one type of financial aid; this is why the average
amount of each type of aid does not sum to the total average aid amount, and the percentage
of students receiving different types of aid does not sum to the percentage of students
receiving any aid.
18. Very few students at either public 2-year institutions or private, for-profit institutions
participated in work-study because many of these institutions are not eligible to participate in
these federally-sponsored programs. Work-study aid is distributed through formulas that take
into account past participation by an institution (as well as the level of need of the students
enrolled) in the campus-based programs. The rules governing the distribution of such aid date
back to a time when few community college students needed financial aid, and also predate
many of the private, for-profit institutions. Furthermore, the work-study program has been
funded at stable levels, which precludes expanding the number of participating institutions.
19. The aid amounts reported here vary slightly from those reported in the data
compendium. The student sample here has been restricted to students whose net costs were
nonmissing and nonzero so that total average costs less average financial aid would equal
average net costs.
20. Much of the difference in grant aid is due to institutional aid. Private, not-for-profit 4-
year institutions generally operate their own grant programs, which are funded from
endowment income and tuition and fees.
21. In 1992 93 the minimum EFC was $700 or $900 for dependent undergraduates
(depending on their specific circumstances), and $1,200 for independent undergraduates. The
Higher Education Amendments of 1992 replaced the Congressional Methodology with a new
formula, the Federal Needs Analysis Methodology, and the minimum contribution in the new
formula for 1993 94 was zero.
22. Net costs are defined as total costs less total financial aid. Among students who did not
receive financial aid, net costs are equal to total costs.
23. These average relationships are correct, although some of the students within the various
income groups may have received more in aid than they incurred in net costs. These patterns
also differ between full-time, full-year students and those who were enrolled part time or part
year. See tables 4.1g and 4.1h in the table compendium for net cost estimates by enrollment
status, and table b3 in appendix B for the weighted distribution of students by income
category.
24. These results also reflect the different institutional choices and attendance patterns of
students at the different institutions. See tables 4.1g and 4.1h in the table compendium for
more detail on this topic.
25. For additional detail on the relationship between enrollment status and net costs, see
tables 4.1g and 4.1h in the table compendium.
26. One reason why net costs were higher among nonaided than aided undergraduates in
public 4-year; private, not-for-profit 4-year; and private, for-profit institutions is that students
who did not receive financial aid were disproportionately drawn from the higher income
groups. Because of their higher incomes, their expected family contributions and their net
costs were also higher.
27. Net costs were not the same among aided and nonaided students whose enrollment
status and institution type were the same, however. Among full-time, full-year students who
were enrolled in a public 2-year institution, for example, net costs (taking all financial aid
into consideration) were $8,696 among nonaided students, and $7,614 among aided students.
See tables 4.1g and 4.1h for more detailed information about enrollment status and net costs.
