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College costs continuing to rise faster than inflation

the Associated Press reports:

College price increases slowed this year but they again topped inflation, and financial aid isn't keeping pace, a new report says.

Tuition and fees at public four-year public colleges rose $344, or 6.3 percent, to an average of $5,836 for the 2006-07 academic year, according to the College Board's annual ''Trends in College Pricing'' report, released Tuesday.

Accounting for inflation, prices rose just 2.4 percent -- the lowest rise in six years, and the third straight time the gap between prices and overall inflation has narrowed.

The news that price hikes are getting smaller is tempered by the fact that this decade has been a period of an extraordinary increases in college costs. Published prices are up 35 percent in five years -- the largest increase of any five-year period in the 30 years covered the report.

That's coupled with the reality that grant aid -- from the government, colleges and private sources -- isn't covering the price hikes. For the 62 percent of full-time undergraduates who receive grant aid, the average net cost of a four-year public school rose 8 percent to $2,700, the report said.

The cost increases at state schools are baffling to many students and parents, given the relative health of the economy and state finances.

After several years of sharp cuts, state spending on higher education has been rising again nationally. The problem is that more people are enrolling, so there is less and less to spend per student.

And, with another angle on the rising cost of tuition, the New York Times has a story about student loan companies courting university administrators:

One student loan company has invited college and university officials, and their spouses, to attend an education conference — in the Caribbean this February, all expenses paid. Another pays universities bonuses based on how much their students borrow. Others gave away gifts like iPods at a recent conference for financial aid administrators.

With rising tuition and lagging government aid making private student loans a big and increasingly competitive business, these are some of the ways lenders are courting universities in hopes that they will steer students their way.

Students took out nearly $13.8 billion in private loans in 2004-5, more than 10 times the amount borrowed a decade ago, according to the College Board.

The key to this business is university financial aid offices, which compile lists of “preferred? lenders, sometimes as few as two. Students rarely comparison shop and rely on those lists.

Read the whole story.