From Issue 2, September 2005

Thousands of American families might find it harder to qualify for financial aid this year and might be asked to contribute more money toward the cost of college due to changes in a complicated federal formula. Under these changes, families will be required to count a greater share of their incomes and assets toward college expenses before becoming eligible for financial aid. As a consequence, tens of thousands of low-income students will no longer be eligible for federal grants; middle class families will be forced to dig deeper into their savings, and some colleges are putting up their own money to make up the difference. The New York Times analyzed the formula and found that families with the same earnings and assets as in 2000 would typically have to pay an extra $1,749 before clearing the eligibility bar for financial aid in 2005, after adjusting for inflation.

Possible Implications for Kentucky: As the cost of higher education increases, those who are price sensitive will find it increasingly difficult to pursue postsecondary education. Findings from the Center’s 2000 survey of Kentucky high school students show that a substantial portion of the state’s young people view cost as an obstacle. A sample of 16- and 17-year-old Kentucky high school students were asked How much of an obstacle do you think the cost of going to college will or would be to your going to college? An estimated 21 percent said, “Not an obstacle,” but 50 percent replied, “Somewhat of an obstacle,” and 29 percent answered, “A major obstacle.”

Perhaps most striking is the difference between those students from families with less than $20,000 in annual income and those from families making over $70,000 annually. An estimated 64 percent of the students from the lower income group view cost as a major obstacle, compared to only 6 percent of the students from the higher income group.

Since the survey was conducted in 2000, Kentucky has experienced above-average tuition increases. According to the National Center for Public Policy and Higher Education, tuition and fees at Kentucky’s public four-year institutions increased 11 percent from the 2001-2002 to the 2002-2003 academic years compared with 10 percent nationally.(4) And while the cost of college in Kentucky remains more affordable than in many other states and remains affordable for most state students,(5) a four-year degree at a Kentucky school costs between $40,000 and $120,000.(6) Increasing tuition and fees coupled with the changing federal financial aid formula suggest that Kentucky faces an even more difficult challenge in getting its citizens to enroll and remain in college.

Contributing Writer Billie S. Dunavent