N.C. legislature steps up funding

By: Ariel Zirulnick, Staff Writer

Posted: 11/1/07

A nationwide study recently released by College Board found that public university tuition is increasing faster than private tuition - and public financial aid sources aren't keeping up.

Public universities saw in-state tuition and fees increase by 6.6 percent for the current academic year. The average cost of public tuition and fees is now $6,185 - a $381 increase from last year.

In contrast, private university costs have gone up 6.3 percent, and tuition and fees now average $23,712.

During the past year, UNC-system tuition and fees increases have followed those of their peers, but at a rate of less than 5 percent, said Rob Nelson, vice president for finance for the UNC system.

"North Carolina remains a very low-tuition state compared to a lot of the country," he said.

UNC-Chapel Hill is the most expensive system school, but the $5,176 price tag of in-state tuition and fees is about $1,000 less than the national average.

The UNC system and UNC-CH have become financial aid celebrities, as has the Carolina Covenant program, which allows low-income students to graduate from UNC-CH debt-free.

Officials from both institutions were panelists at College Board's Annual Forum, which concluded Monday and included a session to present the Carolina Covenant program to other universities.

A decrease in state and federal funding for education caused the tuition increase for public universities, said Rebecca Thompson, legislative director for the U.S. Student Association, a nationwide student lobbying group.

"That has created a perfect storm for skyrocketing tuition increases."

The College Board study showed that federal financial aid isn't keeping pace with the national tuition increases. Two decades ago, the maximum Pell Grant covered 52 percent of the average public university tuition and fees. Last year it covered only 32 percent.

The number of students using subsidized federal loans is also decreasing. Subsidized Stafford Loans constituted 54 percent of all education loans in the 1996-97 academic year and only 32 percent for 2006-07.

"There is a growing gap between the public cost of college, what the federal government can cover and what students and families have to cover," Thompson said.

As a result, more students are turning to private loans to fund their education.

According to the study, private loans now make up 24 percent of all education loans, a 12 percent increase during the past decade.

In North Carolina the General Assembly has attempted to fill the gap, with state funding for financial aid going from nothing in 1998 to $35.6 million for the current year.

The legislature increased the budget for financial aid by 14 percent in the past year, reducing the need for in-state students at UNC-system schools to rely on private lenders.

"That kind of commitment from the General Assembly allows us to keep tuition low in North Carolina," Nelson said.

However, the state is still concerned about the impact of tuition increases on middle-income families who might not qualify for federal and state funds, he said.

The state has a few options for addressing the needs of middle-income students, said Brad Wilson, a member of the UNC-system Board of Governors.

It could develop new programs to target that income group specifically or alter the current thresholds for need-based aid to include higher income levels, he said.

"You could certainly increase accessibility to those funds by increasing trigger points for eligibility," Wilson said.

Middle-income families across the country are feeling the pressure because they often appear wealthier on paper and as a result fail to receive adequate federal financial aid, Thompson said.

Private loans are not regulated by the federal government. Interest rates can be as high as 20 percent, compared to the 6.8 percent cap on federal interest rates.

Those high interest rates, which mean loans cost more and take longer to pay off, also come with fewer protections for the borrower, Thompson said.

The U.S. Congress recently passed the College Cost Reduction and Access Act, which will increase the maximum Pell Grant and lower the interest rate on federal subsidized student loans during the next five years.