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Financial Aid - Issue Briefs - Publication Number: IB02-1 (June 21, 2002)

Trends in Educational Fee Discounting, Student Borrowing, and Need-based Financial Aid at the University of Missouri

How much are students actually paying to attend college? How much do they owe when they graduate? To what extent are their financial needs being reflected in student financial aid programs? This Issue Brief supplements Meeting Need and Rewarding Talent-Status of Undergraduate Financial Aid at University of Missouri, IB01-2 to provide summary data on student financial aid that can be used to further address such concerns.

Section I: Educational Fee Discounting

Universities and colleges discount educational fees for various reasons. These reasons include enhancing the academic characteristics of entering students, increasing revenue, enhancing economic composition of students, rewarding high school students of high ability, and competing adequately with institutions vying for the same students. However, there are times when the reasons for discounting educational fees conflict with one another. For example, trying to attract students of high academic ability may conflict with trying to attract an economically diverse student body. Thus, the discounting of fees can have both positive and negative implications on the institution. Acknowledging these implications is critical to an effective discounting strategy. Table 1 (PDF 49 KB) displays the undergraduate education fee discount rates for FY2000 and FY2001.

The All Financial Aid discount rate shows, on average, how much educational fees are discounted when all sources of financial aid (e.g., institutional, state, federal, and other external) are considered. At the four campuses of UMC, UMKC, UMR, and UMSL, undergraduate students on average paid about 49%, 53%, 41%, and 58% respectively of the “sticker price” to attend college in FY2001. For two years, the fee discount rates tended to increase at campuses other than UMKC, at which the rate stays almost the same as FY2000. In other words, students are paying less and less in proportion to the sticker price.

Section II: Student Borrowing

After Congress raised the federal borrowing ceiling in 1992, nationwide loan aid has more than doubled (108%) during the past decade in constant dollars. Over the past quarter century, federal student aid has drifted from a grant-based to a loan-based system, producing a sea of change in the way many students and families finance postsecondary education. Figure 1 (PDF 46 KB)

In 2000-2001, loans accounted for 58% of total aid to postsecondary students in the U.S., compared to about 47% in 1992-93. Over this same period, the total amount of loans (in constant dollars) has more than doubled, from $19.9 billion in 1992-93 to $42.8 billion. While the abundance of loans may provide access to students who cannot otherwise attend college, it may bring a larger problem for some students in the form of debt.

Do the issues raising national concern also warrant concern for the University of Missouri's graduates? Descriptive data on the accumulated debt of FY1998 through FY2001 degree recipients at University of Missouri are presented in Table 2 (PDF 58 KB.)

At the bachelors level, the proportion of students graduating with debts is slowly increasing, with the exception of UMKC graduates. In FY1998, 45% UMKC bachelor degree recipients had debt, while this rate dropped slightly to 41% in FY2001. The highest percentage of bachelor degree recipients graduating with debt occurred at UMR, where 62% of the students had debt upon degree completion, compared to 41% at UMC and UMKC, and 36% at UMSL.

In FY2001, UMR's degree recipients had the lowest average debt of the four campuses at around $16,850. UMKC's undergraduates accumulated the highest debt load upon graduation, averaging about $26,976.

The percentage of graduates at the masters and doctoral levels who graduate with debt is relatively low at all four campuses. The percentage of professionals graduating with debt, on the other hand, is fairly high, ranging from 80% at UMKC to 91% at UMSL in FY2001. The average debt for professionals System-wide is around $84,000.

Section III: Need-based financial aid

The phenomenon of ‘merit aid’ or ‘non-need-based’ aid (often cited as grants in statistical reports) has attracted increasing commentary in the nation’s higher education. The growing significance of merit aid is an indicator of the rising competitive pressures on colleges and universities, and that it is one factor undermining commitment to the principle of pricing a college education according to the family’s ability to pay.

According to The College Board, the proportion of federal aid awarded on the basis of need has been declining since the mid-1980s. While need-based assistance accounted for about 80% of all federal aid a decade ago, it now accounts for less than two thirds. At the same time, states have taken a sharp turn in the direction of non-need merit scholarships. Non-need state aid has grown 336% while need-based aid has grown 88% since 1982. Parallel trends in the distribution of institutional aid reflect rapid growth of spending on merit and other non-need-based aid at a wide range of institutions.

At the federal level, need-based aid remains less than 60% of all aid to students at all levels in FY2000. At the University of Missouri, need-based dollars from all sources accounted for 39% of all dollars awarded in FY1996, this rate has dropped to 32% in FY2001. Table 3 (PDF 44 KB)Of all the dollars awarded to University of Missouri undergraduate students, need-based accounted for 43% in FY1996, and 35% in FY2001. Table 4 (PDF 44 KB)

  • The College Board (2001). Trends in Student Financial Aid. www.collegeboard.com.
  • McPherson, M. S., & Schapiro, M. O. The Blurring Line: Between Merit and Need in Financial Aid.
  • Change: The Magazine of Higher Learning, March/April, 2002, p39-46.
  • UIDS SAM Data Tables.

Reviewed July 17, 2013.