Unit linked

Federal and state need-based grant aid programs for undergraduate students lagged Minnesota undergraduate postsecondary education price increases�1 _{The consequences}

of federal and Minnesota student need-based aid lagging price increases has disproportionately shifted financial responsibility to undergraduate students from low- and moderate-income families�2

Loans to students made up approximately 51 percent of financial aid awarded in 1998-99� In 2008-09 loan aid increased to 60 percent of aid awarded� The shift from grants to loans has occurred gradually over time� From 1998-99 to 2008-09, grant aid to students increased 227 percent� The increase was driven by the increase in institutional grants (+288%) as compared to federal (+237%), state (+145%), and private and other grants (+64%)� From 1998-99 to 2008-09, educational borrowing increased by 218 percent� The total amount borrowed by Minnesota undergraduates increased faster than tuition and fees or personal income� Tuition and fees increased by 81 to 133 percent depending on the type of institution during this time period� Per capita personal income in Minnesota increased 41 percent from 1999 to 2009—much more slowly than tuition and fees or borrowing�

With postsecondary education prices increasing faster than personal income and government grant aid, students and families have increasingly borrowed to finance a college education� Undergraduate borrowing increased in line with price in some cases and outpaced price in others as public policies and practices favored borrowing over saving for postsecondary education expenses�3 _{Without family savings}

or third-party financial contributions, students and families have no other option than to tap earnings and borrow to pay for postsecondary education�

1� Minnesota Office of Higher Education, Fall 2008, “Enrollment Patterns of Students from Low-Income Families,” 41–47, www�ohe�state�mn�us/pdf/EnrollPatternsLowIncome�pdf� 2� Minnesota Office of Higher Education, Fall 2008, “Enrollment Patterns of Students from Low-Income Families,” 41–47, www�ohe�state�mn�us/pdf/EnrollPatternsLowIncome�pdf� 3� The symbiotic relationship between government lenders, private lenders and postsecondary education institutions facilitated and encouraged student and family borrowing in response to

49

Minnesota Measures – 2011 DURING COLLEGE

Source: Minnesota Office of Higher Education, U�S� Department of Commerce, and U�S� Department of Labor

MinnEsOta rEsiDEnt unDErgraDuatE tuitiOn anD fEEs, fEDEral anD statE grant aiD, anD unDErgraDuatE bOrrOwing, 1993-94 tO 2009-10

Rate of Change 0 50 100 150 200 250 300 350 400 450 Undergraduate Borrowing Federal & State Grant Aid Private Not-for-Profit 4-Year Institutions Public 2-Year Colleges State Universities University of Minnesota 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10

Source: Minnesota Office of Higher Education, U�S� Department of Commerce, and U�S� Department of Labor

MinnEsOta rEsiDEnt unDErgraDuatE tuitiOn anD fEEs, MinnEsOta PEr CaPita PErsOnal inCOME, anD COnsuMEr PriCE inDEx–urban wagE EarnErs, 1993-94 tO 2009-10

CPI-U

Minnesota Per Capita Personal Income Private Not-for-Profit 4-Year Institutions Public 2-Year Colleges State Universities University of Minnesota Rate of Change 0 50 100 150 200 250 300 350 400 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10

50 _{Minnesota Office of Higher Education}

Costs to families for attendance at public institutions in the state are driven by two main factors: tuition changes determined by institutional administration and state funding� The chart above shows the change in the state share of system revenue for Minnesota State Colleges and Universities (MnSCU) and the University of Minnesota between 1988-89 and 2008-09� Total revenue for the comparison is the sum of state appropriations, tuition revenue, and federal funds�

There are two conclusions evident in the data� First, the University of Minnesota receives the lowest share from the state, although this is influenced in part by federal research dollars� Second, the state’s share has been declining for all three groups since 1998-99 despite briefly stabilizing in 2006-07� The declining pattern is likely to continue for the near future�

Source: U�S� Department of Education, IPEDS Finance Survey

PErCEnt Of rEvEnuE frOM statE sOurCEs fOr PubliC institutiOns, 1988-2009

35% 40% 45% 50% 55% 60% 65% 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09

51

Minnesota Measures – 2011 DURING COLLEGE Low wages, lack of money, and too much debt along with

health care and housing top the current financial concerns of United States families, according to recent Gallop Surveys� Future postsecondary education expenses, however, are of particular financial concern for families with young children� Some parents may have unrealistic expectations that a third party, outside their immediate or extended family, will pay for some or all of their child’s postsecondary education� Without a third-party payer, students and their families will need to tap their own savings, earnings, or future income through loans to finance postsecondary education expenses at the time of attendance�

The Minnesota Office of Higher Education calculated an aggregate estimate of who paid for the undergraduate cost of attendance at Minnesota State Grant-eligible institutions and how it was paid for in 2008-09� The estimate was made based on what students and families and others were expected to pay at the time of attendance� Of particular interest was how much students and their families relied on savings, current income, and debt at the time of attendance to finance the undergraduate cost of attendance at Minnesota State Grant-eligible institutions�

Students and families have primary responsibility for financing the price of undergraduate education in Minnesota, at the time of attendance, as shown on the following chart�1

Students and their families finance postsecondary education with one or more of the following:

• Past income (savings) • Current income (earnings) • Future income (borrowing) • Funds from a third-party payer

Third-party payers include aid from institutions, the federal government, state government, and other private sources�

The total estimated undergraduate cost of attendance at Minnesota State Grant-eligible institutions was $5�92 billion in 2008-09, as shown on the following table� Students and families were estimated to have paid $4�85 billion from savings, current income, or borrowing at the time of attendance with various third-party payers contributing $1�07 billion�

who pAYS for the undergrAduAte coSt of AttendAnce

in minneSotA

»

Students and families paid for nearly $5 billion or 82 percent of the costs to attend a postsecondary

institution in Minnesota during 2008-09�

1� The data reflect payment responsibility at the time of attendance� Federal tax deductions and credits reimburse some students and families for out-of-pocket expenses when they later file their federal tax returns�

Source: Minnesota Office of Higher Education

an EstiMatE Of wHO PaiD fOr tHE unDErgraDuatE COst Of attEnDanCE at tHE tiME Of attEnDanCE at MinnEsOta statE grant

EligiblE institutiOns, 2008-09 $0 $1 $2 $3 $4 $5 $6 Other State Government Federal Government Postsecondary Institutions Current Income & Savings Costs paid by students and families = $4.85B, 82%

52 _{Minnesota Office of Higher Education}