While some students will get a break from Stanford’s enhanced financial aid program, others might be facing sticker shock next year. The University has announced a decision by the Board of Trustees to increase total undergraduate fees, which include tuition, room and board, by 3.5 percent for the 2008-2009 academic year.

The announced change in costs represents the smallest annual increase so far this decade, which has not thus far seen an increase smaller than 4.5 percent, according to University data. But many students — including the 36 percent of undergraduates who do not currently receive any aid from Stanford — could still be hit by an additional $1,604 next year.

The reduced tuition increase coincides with a United States Senate Finance Committee inquiry into rising college costs that outpace inflation in universities nationwide. In response to an eleven-point questionnaire sent by the committee, the University reported last week that average tuition per student — after taking Stanford aid into account — has been rising slightly over the last five years and will likely decline next year.

While undergraduate tuition will increase from $34,800 to $36,030 next year, average tuition after Stanford support is expected to fall from $20,597 to $18,572.

While actual tuition may be rising at a rate higher than inflation, average tuition has risen at a much smaller rate and will decrease next year. In response to the Senate Finance Committee’s inquiry, the University suggested that this means tuition revenue does not cover University costs, which are rising at a higher pace than that of inflation.

Full tuition, for those who pay it, covers only about two-thirds of the total cost to the University per student. Average tuition, which factors in Stanford aid, covers only 40 percent of costs. This number will drop to 35 percent once the new financial aid measures are put into place, the University said in its letter to the Senate committee. The balance is paid from endowment spending and donations.

Next year’s drop in average tuition, which will also likely occur at the several Ivy League schools that have introduced new financial aid initiatives for 2008, may assuage much of the Senate’s concern, according to Stanford’s Director of Government Relations Larry Horton.

“I would not be surprised if they don’t slow down their considerations in the matter, or actually think things are in better shape than they thought,” Horton said.

The discrepancy between increases in the published tuition rate and declines in the average tuition students pay can be attributed to the various restrictions on the University endowment, said Vice Provost for Budget Management Tim Warner.

“It is the case that tuition is the largest source of unrestricted funds,” Warned said. “If you are able to generate restricted funds to pay for financial aid, the question as to what the net amount of tuition [the sticker price] is, is really a different question.”

Over 75 percent of the Stanford endowment is restricted to specific spending purposes, according to the University’s response to the Senate inquiry. This compares with 70 percent for Princeton and 83 percent for Harvard.

Because of these significant restrictions, it is not the case that this year’s tuition increase is simply covering the costs of a new financial aid program, according to Warner.

“As you increase financial aid, if you increase it with restricted funds, then tuition is not redistributed to financial aid,” Warner said.

According to University officials, pressure from the Senate Finance Committee and lower tuition increases by peer institutions did not force the hand of the Board of Trustees as it set next year’s tuition.

“Each year we look at four or five principle factors,” Warner said. “We look at the needs of the University, we look at peer institutions’ tuition increases, we look at general economic climate, and affordability of the Stanford education, and we also try to gauge what the general public’s perceptions are about higher education.”

Warner said that this year, the poor health of the economy led to a smaller tuition increase.

“It really becomes a judgment,” Warner said. “Some years some factors are used more heavily than others. This year in particular, we felt that given the general economic times we needed to have a more modest tuition increase.”

This year’s modest increase is not necessarily a harbinger of things to come, said Jeff Wachtel, senior assistant to President Hennessy.

“We set it one year at a time,” Wachtel said. “The trustees meet on an annual basis to consider tuition, room and board. It is difficult to predict what the future will hold, but we hope to set tuition at as low a level as possible and still be able to meet the University’s needs.”