By AnnaMaria Andriotis
Just as many parents are discovering their college savings have taken a hit, a report released today shows tuition costs continue to climb.
In-state tuition and fees at four-year public colleges for the school year beginning this fall rose by an average of 8.3% from last year, to $8,244, according to figures from the College Board, a nonprofit that conducts college research. At private colleges, tuition and fees rose by an average of 4.5% to $28,500.
The cost increases come as millions of parents are finding out that their college savings plans lost money in the third quarter. As we reported earlier this month, investments in 529 plans, which are state-sponsored tax-advantaged accounts for college savers, fell an average of about 9% in the third quarter, according to Morningstar. That was the most significant setback for these plans since early 2009.
The average college-savings plan is down about 6% for the year.
Longer term, college savings plans haven’t kept up with tuition increases. For the last five years, average tuition and fees have risen 41% for in-state public college students and 28% for private college students. Meanwhile, the average 529 plan has returned about 5% over the same period. “It’s part of an ongoing trend of decreasing college affordability,” says Mark Kantrowitz, publisher of FinAid.org and Fastweb.com. “[The] ability to pay continues to decrease.”
To be sure, parents are getting some help. Savings from tax credits have hit a record high, with the average annual tax savings per recipient totaling $1,329 in 2009, up 32% from 2008, according to the latest data from the College Board. Meanwhile, 35% of students received federal Pell Grants during the 2010-11 academic year, which provide a maximum of $5,500 to eligible students. That’s up from a maximum of $5,350 in 2009-10.
But for some higher income families this aid may be of little consolation. For example, less than 1% of families making $100,000 or more per year receive Pell grants, according to FinAid.org. And while American Opportunity Tax Credit is available to families making up to $180,000, the maximum annual tax credit represents less than 10% of the average cost of attending a private college.