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New Department of Education data released in conjunction with the College Scorecard clearly show how much student loan repayment rates vary by whether or not a student completes their program and the type of school a student attends. Repayment rates in the College Scorecard measure the percent of undergraduate federal student loan borrowers making any progress on paying down their debt (i.e. the share that have paid down at least $1 of their balance when they entered repayment).

As shown in the table below, borrowers who do not complete their program are less likely to be paying down their debt than those who graduate (56% versus 77%). We also found that, for both students who finish their programs and those who do not, repayment rates vary substantially based on the type of college they attend, with students who attend for-profit colleges being the least likely to be paying down any of their federal student loan balance. 

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The U.S. Department of Education recently released new data on college costs, outcomes, and debt in conjunction with their College Scorecard – a helpful tool for students and families and a treasure trove of data for analysts. 

We took a look at the data to find some of the schools where debt problems are particularly severe: the schools at which the majority of students borrows, and a minority of borrowers is paying down their debt three years into repayment. We identified 605 schools that met these criteria. For-profit colleges make up more than three-quarters (79%) of the 605 schools. Of the remaining 125 colleges that meet these criteria, 67 are nonprofit colleges and 58 are public colleges. 

These data are detailed in the table below. 

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Statement of Pauline Abernathy, executive vice president, TICAS:

“We congratulate Amazon for deciding to stop promoting Wells Fargo’s costly private education loans. Private loans are one of the riskiest ways to pay for college, with none of the flexible repayment options and consumer protections that come with federal student loans. And Wells Fargo’s rates are among the highest at more than triple the undergraduate federal student loan interest rate of 3.76%. Undergraduate students under age 24 can borrow up to $31,000 in federal student loans, regardless of their income, and more if they’re older. Students should consider other schools if a school requires them to take out a private loan.”

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For more information on the differences between federal student loans and private loans see:

Consumer Financial Protection Bureau Q&A
U.S. Department of Education Side-by-Side


See our previous statement on the July 21, 2016 announcement from Wells Fargo and Amazon that they’re teaming up to promote costly private loans to college students.

TICAS Statement on Wells Fargo/Amazon Deal to Dupe Students into Taking Private Loans

“This is the kind of misleading private loan marketing that was rampant before the financial crisis. It is a cynical attempt to dupe current students who are eligible for federal students loans with a record low 3.76% fixed interest rate into taking out costly private loans with interest rates currently as high as 13.74%. Amazon and Wells Fargo are trumpeting a 0.5% discount while burying the sky-high rates on these private loans and without noting that they lack the consumer protections and flexible repayment options that come with federal student loans. Also buried in the fine print is a note saying, 'Wells Fargo reserves the right to modify or discontinue interest rate discount program(s) for future loans or to discontinue loan programs at any time without notice.' Private loans are one of the riskiest ways to finance a college education. Like credit cards, they have the highest rates for those who can least afford them, but they are much more difficult to discharge in bankruptcy than credit cards and other consumer debts.”

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Read the Washington Post article featuring Pauline Abernathy and our statement

 

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Earlier this week, in the wake of negotiations with the Legislature, California Governor Jerry Brown signed the 2016-17 state budget into law. Disappointingly, it includes no increases to the number of Cal Grants available for low-income students, and even takes money out of financial aid by redirecting $42 million in unspent Middle Class Scholarship (MCS) program funds elsewhere.

On the other hand, there are a few positive developments in the budget agreement for California students and college affordability. The maximum Cal Grant B will be increased by $22 thanks to 2014 legislation by Senate pro Tem Kevin de León which was formalized through the budget. The Full-Time Student Success Grant (FTSSG), created in last year’s budget agreement, is being expanded to allow more full-time California Community College students to receive an additional $600. The budget also includes funding to support innovative efforts at community colleges to improve students’ access to financial aid programs and strengthen coordination with local education agencies, among other goals.

Interestingly, as requested by the Assembly, the budget agreement also calls upon the Legislative Analyst’s Office (LAO) to study the ways in which state-based financial aid can be strengthened to reduce low- and middle-income Californians’ reliance on student loan debt by helping students cover more of their college costs. Among the options the LAO will study is the consolidation of the state’s many financial aid programs – including Cal Grants, the MCS, the FTSSG, and institutional aid programs at the community colleges, California State University, and University of California.

There are several components of this study that make it worth watching:

  • The focus is on total college costs – not just tuition. For most California students, tuition and fees are a fraction of total costs; at the CCCs, for example, where fees are among the lowest in the nation, non-tuition costs including room, board, transportation, books, and supplies can represent more than 90 percent of the total cost of attendance. Yet state and institutional aid programs are currently designed primarily to subsidize tuition and fees.
     
  • It includes all public colleges. Within California public colleges, only the University of California has been able to implement a strategy designed to bring the total cost of college within reach. At others, including the community colleges where the majority of low-income students enroll, there simply aren’t enough resources available to do so. This helps to explain why it is often more expensive for low-income students to attend a community college than a public four-year institution.
     
  • It acknowledges that the burden of debt falls most heavily on lower income students. There’s a widespread misperception that existing grant aid programs bring college within reach for low-income students, whereas higher income students must take on debt. However, existing data doesn’t bear that out: At UC, graduates with family incomes under $53,000 are much more likely than graduates from higher income groups to have debt.

Taking a step back to assess how California’s many financial aid programs are working together is key to understanding and addressing some of the underlying inequities facing low- and middle-income students in affording and succeeding in college. There’s no way to know at this point what will come of this study, but the fact that the study was requested and the specific parameters provided are encouraging signs that the Legislature and Governor recognize that the status quo – which shortchanges low-income students and the colleges that serve them – needs improvement.  

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The cost of going to college is more than just tuition: it includes textbooks, transportation, housing, food, and other personal expenses. Long defined by federal law, these combined costs are called the “cost of attendance” (COA). Colleges are required to give the U.S. Department of Education (the Department) estimated COAs for their students every year. These estimates play an important role in determining students’ financial aid eligibility, and in helping students and families understand the full cost they’re likely to face at a particular school. But some estimates greatly understate those costs because of the way the Department collects them.  

Bear with us while we explain the problem and what we learned about its implications.


How Costs are Estimated and Reported

Because students’ costs can vary widely depending on their living situation, colleges often develop three distinct COA estimates: for living on campus, at home (with family), and off campus (without family). Colleges have considerable discretion over how they estimate each type of cost that comprises the COA, but federal law specifies which types to include: some are for all students, such as textbooks and room and board (housing and food), while others, such as childcare or disability services, are applied only to students who need them.[1]

Schools report their COA estimates[2] by type of cost and by living status through the Department’s Integrated Postsecondary Education Data System (IPEDS) Student Financial Aid (SFA) survey. These figures are used in consumer-facing websites, as well as to calculate the “net price” estimates displayed on tools like the College Scorecard and on many colleges’ Net Price Calculators. (Net price is COA minus grants and scholarships: it’s what students need to cover through savings, earnings, and/or loans.) 

These tools provide students and families with more meaningful cost estimates than typical sticker price listings, but their accuracy is undermined by the fact that they rely on incomplete COA data. This is because the IPEDS SFA survey does not let schools report estimated room and board expenses for students living at home as they do for students living on campus or off campus without family. Why not? It may be that those who designed the IPEDS COA survey questions presumed that schools do not account for any room and board costs in their COA budgets for students living at home, or even that these students don’t incur living costs in the first place. However, for many students, living at home isn’t free; a 2015 survey of low- and moderate-income Wisconsin students found that three in four students living at home purchased food and 39 percent paid rent. Unsurprisingly, then, we have seen that many colleges do recognize that students living at home incur expenses for room and board, and factor them into their COA estimates as federal law allows (and used to require). Wherever this is the case, federal data on college costs and net prices are understated.


Our Analysis

To better understand the scope of the problem and its implications, we selected a random sample of 50 colleges (25 public four-year and 25 public two-year schools) and collected COA data from an alternate source: student aid budgets posted on college web sites or available from financial aid offices. We limited our analysis to schools that reported at least 10 percent of students living at home.[3] For each of these schools we examined whether their COA estimate for students living at home included a room and board allowance, and, if so, how much that allowance was. Our findings confirmed colleges’ widespread acknowledgement that students living at home face significant room and board expenses.

Of the 41 colleges for which we were able to collect alternative COA data to compare with IPEDS,[4] we found:

  • All 41 colleges assume some room and board cost for students living off-campus with family, contrary to assumptions that schools provide no such allowance.
  • Room and board allowances for students living at home range from $1,350 to nearly $8,000 per year. Two-thirds of the colleges (27 out of 41) listed allowances of $3,000 or more.
  • Two of the 41 colleges appear to have reported room and board allowances for students living at home to IPEDS by adding them into the “other expenses” category. While doing so results in more comprehensive federal calculations of costs and net price, this practice runs counter to IPEDS instructions, which state that room and board costs are not to be reported for these students.[5]
  • Thirty-nine of the 41 schools provide room and board allowances that are partially or completely excluded from IPEDS reporting.

         Las Positas College Net Price Calculator*

        *Results for a student living at home with less                            than 30,000 in family income


Implications for Cost and Net Price Estimates

These exclusions have significant impacts on colleges’ cost and net price estimates. For example, Las Positas College – a community college in California – estimates that students living at home have room and board costs of $4,518 in 2013-14. Yet the institution’s net price calculator (NPC) lists an estimated room and board budget of $0, because the school used a federal NPC template that drew on incomplete IPEDS COA data for 2013-14. Had the NPC properly factored in room and board costs, the net price listed for a low-income student living at home would have been $7,407, more than two-and-a-half times the listed net price of $2,889.

How much of an impact it has on college-level figures, or aggregate figures at the state- or national-level, depends on the share of a college’s student body that lives at home. At 24 of the 41 colleges we analyzed, more than half of the students used in the calculation of federal net price by income lived off-campus with family. This means that:

  • Federally collected and widely used COA figures for these colleges are often understated by thousands of dollars, as they don’t reflect the comprehensive COA budgets colleges develop.
  • The net price calculations displayed in consumer tools like the College Scorecard can be substantially understated.
  • Personalized estimates provided by colleges’ own NPCs might be understated if they use the federal NPC template.

The exclusion of these room and board costs in the federal data affect net prices for community colleges more than other types of schools, because community colleges have the greatest share of students captured in the data living at home. However, the problem isn’t limited to public, two-year schools. There are more than 1,000 colleges in other sectors across the country where at least half of students counted in the federal net price data live at home.


The Solution: Collect Room and Board Estimates for All Students

Consumer tools that rely on federal data are designed to provide students and families reliable and comparable college cost estimates – something they cannot do given the way COA data are currently collected in IPEDS. Fortunately, the solution is simple: Expand the IPEDS SFA survey to include room and board estimates for students living at home.


[1] The standard cost categories are tuition & fees, room & board, books & supplies, and other expenses (transportation & miscellaneous personal expenses).

[2] Colleges report COA estimates for first-time, full-time, full-year students. Estimates include standard cost categories that apply to all students, but not specialized cost categories.

[3] Enrollment by living status is reported for first-time, full-time Title IV aid recipients.

[4] At the remaining nine colleges, we could not find COA budgets listed on their websites and did not receive responses to our queries about COA. Our analysis incorporated the latest available cost of attendance budgets through the 2015-16 academic year, and cost of attendance data reported to IPEDS for 2013-14, the latest available survey year for IPEDS SFA net price by income cohorts.

[5] 2015-16 IPEDS survey materials make clear that for students living off-campus (with family), room and board costs are not reported, only other expenses.

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Earlier today, California Governor Jerry Brown unveiled his updated budget proposal for 2016-17. It includes a small but important expansion to a community college financial aid program created last year, which helps low-income students enroll full time. Under the expansion, the benefit will extend to more students enrolled in career technical education programs.

However, there’s more that can and should be done in the 2016-17 state budget to make college affordable for more Californians. As we’ve noted previously, this budget – as did the last – assumes unrealistically high spending in the Middle Class Scholarship (MCS) program. Funding for the program is set by law, and the amount that has been set is more than enough to serve the students eligible for the program, both now and in the foreseeable future. 

In 2015-16, about $34 million of the appropriated amount went unspent, and now that the year is almost over the Governor is proposing to spend those funds elsewhere. We project that even more of the appropriated MCS funding – $41 million – will go unspent in 2016-17. In the same year, hundreds of thousands of eligible Cal Grant applicants will not receive grants because too few are available, and many others will struggle to cover non-tuition costs with a grant that has not kept pace with inflation. 

Leaving unnecessary appropriations in the budget either to return to the state’s coffers at the end of the year, or be reallocated one year at a time, is a wasted opportunity. In future years, as the scheduled MCS appropriation increases, the amount unspent will be even higher.

There have been several successful efforts to strengthen Cal Grants in recent years, including the last two state budget agreements, which increased the size of low-income students’ non-tuition grants (2014-15) and the number of awards available (2015-16), and 2014 legislation by Senator Kevin de León which further increases low-income students’ non-tuition grants each year. Even after these increases, however, low-income students remain either unserved or underserved by the Cal Grant program. This year, Senator Marty Block has a bill (SB 1357) that would increase the non-tuition award for community college students. Assemblymember Jose Medina has legislation (AB 1721) that would both increase the number and size of Cal Grants available, both of which are top priorities for more than 20 higher education advocacy, student, civil rights, business and workforce groups across the state.

Clearly, the Legislature has the will to strengthen college affordability.

In unveiling his updated proposal, the Governor underscored the need for fiscal restraint. Luckily for legislators seeking to improve college affordability, there is a way to strengthen Cal Grants in 2016-17 within budget constraints. In both the Assembly and Senate budget subcommittees, recent hearings on financial aid have included discussion about unspent MCS funds going forward and whether they should be tapped to increase the number of Cal Grants available for low-income students. As soon as next week, these committees will vote on these very issues. Given the substantial need within the Cal Grant program, we urge the Legislature to reduce the ongoing scheduled MCS appropriations, and invest the savings into strengthening Cal Grants for low-income students as almost two dozen organizations have recommended

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We’re big advocates of providing students and families with tools and information to help them decide where to go to college and how to pay for it, and the Obama Administration deserves credit for making huge progress in this area. They created the College Scorecard, released new college-level data, and encouraged schools to use its voluntary “Shopping Sheet” format for financial aid award letters. Without the Shopping Sheet, college financial aid packages can be incredibly difficult to decipher and compare. It serves the same purpose as the standard window sticker required on all new cars since the 1950s—to provide key information in a consistent format so consumers can more easily understand their options.

Unfortunately, the Shopping Sheet and College Scorecard currently display different cumulative debt figures, such that the same institution can appear to be a low debt school on the Shopping Sheet and a high debt school on the College Scorecard.  While the College Scorecard shows the median debt of program completers only, the Shopping Sheet displays the median debt of all students entering repayment, regardless of whether they completed their program.* Including non-completers in the median debt calculation will often produce lower debt figures because non-completers borrow for a shorter period of time, sometimes only a semester or two before leaving a program. This is especially true for colleges where many students borrow but fail to graduate. As a result, the debt figure included on the Shopping Sheet inadvertently makes colleges with low completion rates (and high borrowing rates) look much more affordable than they actually are. This makes it harder for students to determine where they are likely to graduate without burdensome debt.  

The College Shopping Sheet Should Show Median Debt Among Completers, Just Like the College Scorecard

The table below demonstrates just how different the debt figures for the same school can be when you include all students entering repayment versus only program completers, particularly at colleges with low graduation rates.** For example, the median debt of completers at Ashford University is nearly three times higher than the median debt figure of all students who borrowed ($32,813 versus $11,190). This difference can be explained by the fact that 79 percent of students drop out of Ashford before they accumulate as much debt as those who complete their program. A similar difference is also evident at the University of Phoenix-Online, where 80 percent of students do not complete their program.

Differences in Median Debt Calculations


The problem is compounded when you compare schools with low and high graduation rates. To illustrate the potential magnitude of the impact of completion rates on median debt, we looked at median debt figures for Ashford University (where just 21 percent of students graduate) and Stanford University (where 95 percent of students graduate). While the typical Stanford graduate has 63 percent less debt than the typical Ashford graduate ($12,224 versus $32,813), the median debt among all students for the two schools is nearly identical ($11,190 versus $11,500).  Similarly, students at University of Phoenix-Online Campus and Florida State University have nearly identical median debt figures when non-completers are included. But the schools have dramatically different graduation rates (20 percent versus 76 percent), and graduates of the University of Phoenix-Online Campus typically have 67 percent more debt than graduates of Florida State University ($35,500 versus $21,250).

Students shopping for schools based on affordability are aiming to graduate with a degree, and should be informed about the debt they can expect when they accomplish that goal.  We’ve previously called attention to the problems with combining the debt levels of completers and dropouts (e.g., here and here), and we praised the Department last year for putting the median debt at graduation on the College Scorecard. We’re disappointed that the Department did not put median debt at graduation on the Shopping Sheet as well this year. Given the Department’s efforts to highlight colleges that do a good job of graduating students, it is particularly surprising that the Shopping Sheet uses a debt metric that makes colleges with high borrowing rates and low completion rates look more affordable than they are. We hope the next version of the Shopping Sheet will show debt for completers only, so students and families will know how much debt they can expect to have at graduation from different colleges.

* In addition, Shopping Sheet figures reflect one year of data, i.e., median cumulative federal student loan debt for undergraduates entering repayment in 2013-14, while Scorecard figures represents the same metric for those entering repayment in 2012-13 and in 2013-14 (pooled).

** Calculations by TICAS on data from U.S. Department of Education, College Scorecard.  Graduation rates shown here measure the share of first-time, full-time students who started in 2006-07 and 2007-08 who completed their programs within 150% of normal time by 2013-14. Median debt figures represent cumulative federal student loans borrowed for undergraduate education among borrowers who entered repayment in 2012-13 and 2013-14.

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Today the Administration announced a multifaceted plan to protect and support student loan borrowers. The announcement includes commitments to improve loan counseling, institute clear servicing standards and disclosures, and to help more borrowers enroll in income-driven repayment plans.

Students should have the best information in the right format to make critical decisions about how to pay for college. Loan counseling can play an integral role in helping student loan borrowers make wise decisions and avoid delinquency and default. The Department of Education’s online loan counseling tools serve 6.5 million students a year, and the Administration’s plan to make improvements based on input from borrowers and other stakeholders will help more students make the choices that are right for them. For TICAS’ recommendations to improve loan counseling that do not require legislation, click here.

Student loan servicers are paid more than $800 million a year to help borrowers access the repayment options, protections, and benefits that come with federal loans. Yet even so, a record 7.9 million borrowers are in default, and there are more than two million federal student loan borrowers over 90 days delinquent. Servicing failures, exacerbated by a lack of standards and misaligned incentives, are widespread. Once implemented and enforced, the standards outlined by the Administration – as well as the commitment to seek input on them – will make a huge difference for borrowers.

Providing borrowers in repayment with better information at the right time is a clear-cut next step. The Consumer Financial Protection Bureau’s Payback Playbook would share personalized information with borrowers to improve their understanding of repayment options, a positive move in the right direction. For TICAS’ recommendations on student loan servicing, click here.

Strengthening servicing standards by fully implementing the Administration’s new Student Loan Borrower Rights would improve servicing for borrowers in the following ways: (1) ensure servicers provide accurate and actionable information; (2) establish a clear set of expectations for minimum requirements for communication and services with borrowers; and (3) hold servicers accountable to borrowers and taxpayers. And, when servicers fail to do the right thing, the Department’s forthcoming complaint system can help ensure that borrowers’ concerns are addressed and resolved. We have recommended that the complaint system be public and searchable, connected to the complaint systems used by other federal and state agencies, and made clearer and easier to use.

Lastly, a key part of ensuring that fewer borrowers default on their loans is boosting borrower awareness of repayment plans that tie monthly payments to income. Our Project on Student Debt developed the policy framework and led the campaign that resulted in enactment of the Income-Based Repayment (IBR) plan, which has been available to borrowers since 2009. The Administration announced a new goal today to enroll two million more borrowers into income-driven plans like IBR. Although income-driven repayment is not the best choice for every borrower, clearly many more borrowers could benefit from tying their monthly payments to an affordable share of their income and knowing that they will not be repaying their student loans for the rest of their lives. The Debt Challenge, the Administration’s campaign to promote employer outreach and boost awareness of repayment options, will help even more borrowers make better informed repayment decisions. We will do our part to get the word out by contacting more than 100,000 subscribers to our website, IBRinfo.org, and sharing information with our Twitter followers and Facebook friends to remind them about income-driven repayment plans.

As the Administration moves forward on taking action to help borrowers manage student debt, we look forward to seeing these steps, tools, and standards put in place so that fewer borrowers end up delinquent or in default.

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This week, the U.S. Department of Education announced two changes that will simplify an important but frequently overlooked part of the financial aid process, starting with the 2017-18 school year. As a result, low-income students who file a Free Application for Federal Student Aid (FAFSA) will face fewer barriers to receiving the aid they qualify for, and college financial aid offices will be able to spend more time helping students instead of chasing paper.

The financial application process doesn’t end when students submit the FAFSA, which is the gateway to federal grants, loans, and work-study as well as most state and college aid. Last year alone, 5.3 million students – one in four FAFSA applicants – were required to provide extra documentation to their colleges before they could receive federal student aid. This added step in the FAFSA process is called “verification,” and it mostly affects students with family incomes low enough to qualify for a need-based federal Pell Grant. Our 2010 study, After the FAFSA, found that that the complexity of the verification process unnecessarily prevents many low-income students from receiving aid they are otherwise eligible for. Even for those who get through all the paperwork, the added hurdles delay access to needed aid by weeks or even months into the school year.

The Department has now announced that it is eliminating certain burdensome verification requirements based on clear evidence that they are not worth the trouble for students, schools, or taxpayers.

One of the reasons the Department of Education currently flags students for verification is if the income reported on their FAFSA appears too low to support their household. These students must then document their sources of income and may have to explain how their family survives financially. A recent Boston Globe piece details just how difficult this process can be, and college financial aid administrators have reported tremendous and unnecessary costs to students and schools.

Starting in 2017-18, students will no longer be targeted for verification simply because their families are very poor. The Department of Education said it is eliminating this type of verification because evidence showed that “the burden on families […] far outweighed the benefits.” Nearly all students selected for this form of verification (95%) did not see changes to their Expected Family Contribution (EFC), which is used to determine federal aid amounts.

In addition, students who are flagged for verification for other reasons will no longer have to provide extra paperwork if someone in their family received SNAP benefits (formerly called food stamps) or if they made child support payments. The Department of Education found that verifying those pieces of information did not make students more or less eligible for aid.

We applaud the Department of Education for removing these unnecessary verification requirements, which made the aid application process more complicated for the neediest students. This is an important step, but more still needs to be done to ensure that the FAFSA verification process protects the integrity of the federal student aid program without unduly denying or delaying access to aid that eligible low-income students need to succeed.

This Administration has already dramatically simplified the initial FAFSA filing process for millions of students and families, making it possible for them electronically transfer their tax information into the FAFSA and apply for aid when they typically apply to colleges, as TICAS and many others have urged. We look forward to working with Congress and the Department of Education to further simplify the aid application process from beginning to end for students and schools, both by eliminating unnecessary questions on the form and by further reducing unnecessary verification and paperwork.

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While the President’s proposed budget fully funds the scheduled increase in the maximum Pell Grant and continues to tie it to inflation after 2017, the House Budget Committee’s FY17 budget eliminates the $120 increase scheduled for 2017-18 and freezes the maximum grant at $5,815 for 10 years.

In the 1980s, the maximum Pell Grant covered more than half of the average annual cost of attending a four-year public college. Cutting the maximum grant and freezing it for the next 10 years would reduce the share of covered costs from an already record low of 29 percent in 2016-17 to just 21 percent by 2026-27, making college even less affordable. 

 

Sources: Calculations by TICAS on data from the College Board, 2015, Trends in College Pricing 2015, Table 2, http://bit.ly/1Pyv2sJ, and U.S. Department of Education data on the maximum Pell Grant. Calculations for 2017-18 through 2026-27 assume that the maximum Pell Grant is frozen at the 2016-17 level. College costs are defined here as average total in-state tuition, fees, and room and board costs at public four-year colleges. Projected college costs for future years were estimated by using the average annual increase in costs over the most recent five years.  

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