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Some Schools Cut Student Grants, Scholarships


The Wall Street Journal - July 16, 2012

After loosening their coffers to help families cope during the recession, some colleges now are cutting back on grants and scholarships, aid that students don't have to pay back.

The move—prompted in part by the colleges' own financial troubles—is prompting students and their families to borrow more to close the gap, raising the already-heavy debt load many graduates will face.

Grants and scholarships fell 15% during the just-completed academic year, according to a study to be released Monday by student-loan provider Sallie Mae.

On average, U.S. undergraduates received $6,077 in grants and scholarships in the 2011-2012 academic year, down from $7,124 a year earlier, according to the study, which polled 1,601 undergraduates and their parents.

While college aid typically accounts for a big chunk of grants and scholarships, the category also includes scholarships from outside organizations and federal funding, such as Pell Grants.

"During the deepest valleys of the recession, schools were trying to maintain a certain level of [financial aid]. As schools have burned through their reserves, they're pulling back," said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

Some colleges are raising the bar to qualify for both need- and merit-based scholarships, a trend that will likely continue next academic year, Mr. Draeger said. Meanwhile, college costs have continued to rise at rates faster than inflation, particularly at public schools faced with state budget cuts, according to College Board figures.

As a result, some students and their families are taking on more debt or are opting for lower-priced public schools or two-year institutions. Some students also are passing on dorm life, choosing instead to live at home to save on room and board, according to the study.

The average amount borrowed by families—a calculation that includes parents and students who didn't borrow at all—rose nearly 17% last year to $5,551. That was up from $4,753 in the 2010-2011 academic year.

Meanwhile, the percentage of families with college students taking out federal student loans grew to 34%, up from 25% in 2008-2009, according to the report, conducted by the research group Ipsos.

When his father's income dropped last year, Aldo Frosinini anticipated his aid package from Swarthmore College would be more generous for his coming sophomore year. Instead, his expected family contribution—the amount a school believes a family can cover—rose, and he was offered about $3,000 less in grant and scholarship aid, to a total of about $36,000, he said.

His choices right now, he said, are either loans or transferring to a cheaper school, an option he said he is seriously considering.

"We've had to go entirely with loans, though we really didn't want to do that," said the 19-year-old. "There's been a lot of stress in our house."

Swarthmore said it has raised its financial-aid budget 51% over the last three years and strives to meet the financial needs of every student.

Some families last year couldn't afford even to maintain the same contributions as the prior year amid tight household budgets. In the typical family, parents contributed $5,955 from their own income and savings in 2011-12, down from $6,664 in 2010-11, the survey found.

And only one in five parents said they strongly agreed that children should attend college for the experience, no matter their future earnings potential, down from one in three in the 2009-10 academic year, when the question was first asked.

"Parents have stepped back a bit and said 'We can't foot all the bills,' " said Sarah Ducich, senior vice president for public policy at Sallie Mae.

Meanwhile, some colleges are altering programs that promised students of certain family incomes they wouldn't need to take out any loans. Cornell University said earlier this month that, beginning with the class entering in fall of 2013, only students whose parents earn less than $60,000 will be eligible for loan-free aid. That policy previously covered families with incomes below $75,000.

Dartmouth College and Williams College also have limited their no-loan packages in recent years, while Wesleyan University earlier this year announced it will begin to consider a student's ability to pay in its admissions decisions, due to the school's financial constraints.