Oct. 29 (Bloomberg) -- Costs rose 5.9 percent this year at private four-year colleges in the U.S., outpacing the biggest gain in inflation in 17 years and increasing the demand for financial aid.

Tuition and fees rose 0.3 percentage point more than inflation at those schools, to an average of $25,143, according to a report today by the College Board, the New York-based publisher of the SAT exam for high school students.

The increase means that students are likely to become even more dependent on financial assistance from the schools or from federal programs, according to the report.

``Colleges are really holding down their expenses,'' said David Warren, president of the National Association of Independent Colleges and Universities, based in Washington, in a telephone interview. ``They are going to do everything they can to increase the amount of grant aid to students.''

The Consumer Price Index rose 5.6 percent in July, the biggest year-over-year increase for any month in 17 years. The last July-over-July increase that was higher was 6.4 percent in 1982.

While more total student financial aid has become available, the volume of private loans has been shrinking, even before the credit crisis that began in September, the report said. Private- loan volume declined $173 million, or 1 percent, to $19.1 billion during the school year, according to the College Board.

Financial Aid

Students' aid from grants and federal loans rose an average of 5.5 percent, the College Board said.

Tuition and fees rose 0.7 percent, after inflation, for students at public four-year institutions, and fell 0.8 percent at public two-year colleges, according to the College Board's report.

From 1977 to 2007, tuition and fees at two-year colleges rose an average of $1,300 when adjusted for inflation. That figure climbed about $4,000 at public four-year colleges and $15,000 at private four-year schools.

Family income during the same period increased by $463 for the poorest 20 percent of families, $11,275 for the middle 20 percent and $146,650 for the wealthiest 5 percent, the report said.

Budget cuts in at least 17 states suggest tuition increases are likely next year, said Molly Corbett Broad, president of the Washington-based American Council on Education, whose 1,600 university members include Princeton University in New Jersey and the University of Wisconsin in Madison.

Schools may increase class sizes, postpone construction and equipment replacement, impose travel bans and reduce the availability of classes, Broad said.

The College Board is a non-profit association with more than 5,400 colleges, universities and other educational institutions as members. The organization's Scholastic Aptitude Test, or SAT, is a widely used benchmark for admission to college.

To contact the reporters on this story: Julie Ziegler in Boston at jziegler@bloomberg.net.

Last Updated: October 29, 2008 15:19 EDT