What Has Changed Since 1995-96

Tuition Increases

Since the academic year of 1995-96, tuition has increased substantially. Between 1995-96 and 1999-2000, tuition increased 17 percent at public 2-year and 4-year colleges. During the same time period, tuition increased 24 percent at private 4-year colleges. The current average tuition at different types of institutions is provided in the following table.

Source: College Board, Trends in College Pricing 1999

Financial Aid Increases

In terms of tuition alone, college is certainly more expensive than it was in 1995-96. Financial aid appears, however, to be keeping up. This is part of the reason millions of students and their families continue to find higher education financially manageable. The most recent financial aid estimates are for the 1998-99 academic year. Since 1995-96, financial aid per student¹⁵ has been increasing at roughly the same rate as college tuition. Note that both loan and grant aid are increasing. As indicated in the graph below, the amount of financial aid per college student increased 15 percent between 1995-96 and 1998-99. This is comparable to the 12 to 18 percent increases in tuition experienced at different types of colleges.

Percentage Increase in Financial Aid and College Tuition
1995-96 to 1998-99

SOURCE: College Board, Trends in Student Financial Aid 1999 and Trends in College Pricing 1999
Note: Aid data calculated on a full-time equivalent basis.

Tax Changes

In addition to increases in financial aid, new federal tax credits have been established that allow many families to claim federal income tax credits. The Hope Credit allows families to claim up to $1,500 in a nonrefundable tax credit to offset the expenses associated with the first 2 years of college. The Lifetime Learning Credit allows for a credit of up to $1,000 for subsequent years of college. These education credits are gradually reduced if your modified adjusted gross income is between $40,000 and $50,000 ($80,000 and $100,000 in the case of a joint return).

Recent changes in the federal tax laws have also made it easier to save for college by establishing education IRAs¹⁶ and allowing parents to use funds in their retirement accounts to help pay for college. Many individual states are also establishing assisted savings or prepaid tuition programs that help families better prepare for college.

Family Income

Families with higher incomes may have more money available to help pay for college. Between 1995 and 1998, median family income increased from $40,611 to $46,737, a 15 percent increase.¹⁷

Working While Going to College

The majority of college students work to earn money while attending college. The following table shows the percentage of full-time, full-year college students in different types of colleges who work different numbers of hours.¹⁸

SOURCE: U.S. Department of Education, National Center for Education Statistics, National Postsecondary Student Aid Study: 1995-96.

While a substantial number of college students do not work at all, the majority of students in all types of colleges work to some extent while in school. In deciding how much work to combine with your studies, you need to strike your own balance between the extra income and experience employment provides and a potentially harmful loss of study time. A recent study found that students who worked up to 20 hours a week were no less likely to finish their bachelor's degree than students who did not work at all, but those working more than 20 hours were less likely to finish their degree within 5 years.¹⁹ Most 4-year college students who work, work less than 20 hours.