Commentary: Current Year
College Affordability: Colleges, States Increase Financial Burdens on Students and Families
By Patrick M. Callan
College affordability continues to decline in the United States. Of all the performance categories in the Measuring Up report cards, the state results for affordability are the most dismal. Since our previous edition of Measuring Up, the number of states receiving “F” grades increased from 36 to 43. Even after all financial aid is taken into account, students and their families must devote an increasing share of their income and borrow more to pay for a year of college education at almost all public and private two- and four-year campuses. Only the wealthiest of American families are exempted from declining college affordability. Measuring Up 2006 tracks the decline from the early 1990s, a decline that, as reflected in state grades, is even greater than that reported in the 2004 report card.
It is no coincidence that during these years of declining affordability, U.S. college access rates have flattened, and the gap in rates of college attendance between low-income and other Americans has persisted. Family income remains the best predictor of who will go to college and what college they will attend. Declining affordability is clearly a critical factor in these choices:
- Declining affordability discourages many low-income students from enrolling in challenging high school courses and even from graduating from high school. Those who believe college is beyond their financial reach have little reason to prepare for it.
- Many students resort to “trading down,” that is, choosing less expensive colleges than those that would best fit their educational goals and qualifications. Others take on large debts and work more hours than is advisable during the school year, which may contribute to academic difficulties, lengthen the time in college, or even jeopardize degree completion.
- Current college graduates—and many students who do not graduate—are the most heavily indebted young Americans in our history. Large debt burdens may discourage some students from accumulating more debt to pursue advanced study, or from careers that are not highly remunerative, such as teaching or service in nonprofit organizations.1
The issue of college affordability as it is experienced by families and students is captured by figure 1. Since the early 1980s, the rate of increase in the price of college has far outstripped price increases in other sectors of the economy, even health care. Over these years, median family income increased by 127%; college tuition and fees by 375%.
|
Figure 1. The increase in the price
of college has outstripped price increases in other sectors of the economy. |
College Tuition/Fees represent sticker price tuition and fees less all types of grant aid except grants related to athletics and other student talents for undergraduate and graduate studies at 2-year or 4-year colleges, major universities, and professional schools. Room and board charges and textbook charges are not included. Data were collected from 88 metropolitan cities. Food & Beverage includes food at home; food away from home, and alcoholic beverages. Housing includes rent of primary residence, lodging away from home, owners’ equivalent rent of primary residence, and tenants’ and household insurance. (Only the “shelter” category was used in this analysis.) Apparel includes men’s and boys’ apparel, women’s and girls’ apparel, infants’ and toddlers’ apparel, and footwear. Transportation includes private transportation (new and used motor vehicles, fuel, parts and equipment, maintenance and repair) and public transportation. Medical Care includes medical care commodities ( prescription drugs, over-the-counter-drugs, and other medical equipment and supplies) and medical care services (professional medical services, hospital or nursing home services, and health insurance imputation). Energy includes fuel oil, other household fuels, electricity, utility natural gas services, and motor fuel. |
| Source: Percent growth rates calculated based on Consumer Price Index for All Urban Consumers, available at the Bureau of Labor Statistics website . All industries above are components of the CPI. |
Tuition and fees represent the fastest growing component of the cost of college to students and families. For public colleges and universities, tuition is also the cost most susceptible to public policy influence. Other costs—e.g., housing, books, and transportation—are also part of the affordability equation. And the 127% increase in median family income since 1983 masks the disproportionate impact of changes in college affordability on families of differing incomes. Table 1 shows the net costs of college attendance as a percentage at the lowest, middle, and highest quintiles of family income (the net costs of college attendance include tuition, room and board minus financial aid). Compared with 1992, families in the lowest income quintile need an additional 16% of their income to pay for a public four-year college education in 2005. In contrast, the highest income families only need an additional 1% of their income to pay for the same college costs.
Net college costs* as a percent of family income |
| 1992 | 2005 (MU 2006) | %
pts increases |
Top-Bottom gaps | |
|---|---|---|---|---|
| At public four-year colleges and universities | ||||
| Lowest 20% income families | 57% | 73% | 16% | 50% pts (1992) 64% pts (2005) |
Middle 20% |
17% | 23% | 5% | |
| Highest 20% | 7% | 9% | 1% | |
| At public two-year colleges | ||||
| Lowest 20% income families | 50% | 58% | 8% | 44% pts (1992) 51% pts (2005) |
| Middle 20% | 14% | 17% | 3% | |
| Highest 20% | 6% | 7% | 1% | |
| Table 1. Financial burden to pay for college
has increased for almost all families… but increased more
for middle- and low-income families. Compared with 1992, families
in the lowest quintile need an additional 16% of their income to
pay for the increased costs at a public four-year college in 2005.
In contrast, the highest income families only need an additional
1% of their income to pay for such costs. *Net college costs equal tuition, room, and board minus financial aid. The numbers may not exactly equal due to rounding (Source: Measuring Up 2006). |
Although declining affordability clearly has its greatest impact on low-income families, we should not be surprised that public opinion polls show widespread concern among all Americans. In fact, the public reports greater concern about the cost of their children’s college education being priced beyond the income of the average family than about a secure retirement, housing, or automobiles, other elements of the “American dream.”2
Tuition
Higher education experts and leaders disagree when college costs and prices are discussed. Some endorse higher tuition, some do not; some are sanguine about growing student debt, others are not. Declining affordability is a fact, however, regardless of opinions about tuition and debt. Although a serious concern of most families and students, this trend is not the consequence of explicit public policy or public consensus.3 Rather, this trend represents the cumulative results of responses to economic pressures, demographic shifts, and public policy drift that have undermined college affordability, such as:
- The knowledge-based economy increasingly eliminates those without education and training beyond high school from employment opportunities that can support a middle-class standard of living. In the recent past, college was the most advantageous route to the middle class, but there were many other paths for the highly motivated and hardworking. In today’s economy, colleges and universities have become the gateway to the middle class for most Americans.
- The number of high school graduates and the proportion of high school students who aspire to college have both increased over this decade.
- States, for the most part, lack effective policies for college and university tuition.
- States have often made drastic reductions in college appropriations in tight budget years; college and university leaders and trustees have usually acquiesced in budget cuts if all or a substantial portion of reductions can be replaced with increased tuition.
- Many states have delegated tuition authority to public colleges and universities, often as part of deregulation or decentralization policies. The absence of state influence on these decisions has inevitably led to higher, often precipitous, tuition increases.
None of these factors alone would seem responsible for the long-term decline in college affordability at the very point in time when more Americans than ever need college opportunity and when the nation needs more college-educated workers and citizens. It is their convergence that has permitted “pricing with impunity” and the consequent decline in college affordability. Market forces and public policy might be said to have colluded to undermine college affordability.
Student Financial Assistance
Historically, the major public purpose of financial assistance has been enabling eligible but needy students to enroll in college. Most of this aid comes from federal and state governments and from colleges and universities. Student financial assistance from all these sources has increased to $45 billion, or an increase of 140% since 1991. But these increases have not been large enough to keep pace with the increased costs of college attendance, particularly not with tuition. For example, the nation’s largest source of financial aid for low-income college students is the Federal Pell Grant program. The average Pell Grant covered 76% of tuition at public four-year colleges and universities in 1990-91. Between 1991 and 2005 Federal Pell Grant funding increased by 84%. But the average Pell Grant currently covers only 48% of tuition at these institutions, a decline in purchasing power despite increased federal investment.
By the mid-1990s, pressure from steep and rapid tuition increases began to squeeze middle-income families, who made their concern known to political leaders. State and federal governments responded with programs that were no longer directed at the most needy but were created to cushion the impact of rising tuition on middle-class families. These include: federal tuition tax credits and deductions, state merit-based programs, and tax advantaged savings plans. Typically these programs do not require demonstration of financial need and, in the case of federal tax credits, actually exclude the most financially needy from eligibility. Many of the programs have purposes beyond student assistance, among them increasing college participation, offering tax relief, and encouraging the most academically talented students to forego opportunities to attend out-of-state institutions and to attend their own state’s institutions. Whatever the purposes or intentions, these programs represent fairly recent claims by the middle class for college financial assistance.
Collectively, colleges and universities account for the largest amount of student financial aid (see table 2). As aid was refocused in Washington and state capitols to address the middle class college squeeze, many four-year colleges and universities were—and are—doing their own refocusing. Their reasons were different, but the results were similar. For institutions, the stimulus is the intense competition for talented students and for the prestige and rankings that reward the winners. For many institutions, the principal public purpose of financial assistance to needy students has been transformed into the narrower institutional purpose of a recruitment incentive to attract desirable students. The consequence is that average institutional financial aid grants are larger for students from middle- and high-income families than they are for students from the lower-income families (see table 2). In this competition for desirable students, those from middle-and high-income families often bring the higher SAT scores that weigh heavily in college rankings. And for a student from these families, financial assistance may well expand his or her choice of institution. In contrast, without such assistance, a student from a lower-income family may not be able to attend any college. For institutions themselves, a political consequence of their shift of aid from the neediest to the more affluent students may well have severely compromised their credibility as advocates for government need-based financial aid programs, such as Federal Pell Grants. By no means are we condemning competition among colleges and universities, whether in athletics or talented desirable students. Our concern here is with the extent to which the current institutional competition does not recognize and respect a primary public goal and purpose.
Full-time dependent undergraduates receiving grant financial aid, 2003-04, by income |
| Provider | Federal Government | State Government |
Institutions | |||
| Parental income (2002) |
% receiving grant aid |
average award | % receiving grant aid |
average award | % receiving grant aid |
average award |
| below $20,000 | 73% | $4,000 | 36% | $2,900 | 36% | $4,700 |
| $20,000-39,999 | 63% | $2,900 | 38% | $2,700 | 40% | $5,000 |
| $40,000-59,999 | 22% | $1,700 | 28% | $2,300 | 35% | $5,500 |
| $60,000-79,999 | 4% | $1,500 | 19% | $2,000 | 34% | $5,700 |
| $80,000-99,999 | 1% | $2,300 | 14% | $2,100 | 34% | $6,100 |
| $100,000 or more | 1% | $1,700 | 8% | $2,400 | 29% | $6,200 |
| Table 2. Middle- and upper-income students
receive larger amounts of institutional grant aid than low-income
students do. Source: NCES (2005), '2003-04 NPSAS: Student Financial Aid Estimates for 2003-04.' |
The most common response to increases in the cost of college by students and families is increased borrowing—more students incur debt and the amount they borrow increases each year. Since 1980 the federal financial aid system has been transformed—with little explicit and informed policy debate—from a system characterized mainly by need-based grants to one dominated by loans. The majority of bachelor’s degree recipients graduate with debt: 62% of public institution graduates and 73% of those from private nonprofit institutions. And many low-income students choose not to enroll in college rather than incur debt.
Affordability and Underperformance
Four successive editions of Measuring Up report cards have now documented the deterioration of college affordability for families and students. The performance of the nation and the states on this important aspect of college opportunity is so poor that some have even asked whether it makes sense to continue to grade affordability when so many states receive “Ds” and “Fs.” But denial is not an option for students and families, and neither is it a strategy that will encourage the country, the states, and the colleges and universities to confront difficult problems.
As critical as it is, the college affordability problem does not exist in a vacuum. It is one of many symptoms of the underperformance of American higher education that signal the urgent need for a comprehensive and fundamental reexamination of higher education finance. This report card highlights these symptoms: flat college participation rates; lack of progress in extending college opportunity for low-income Americans; poor rates of completion of college programs; escalating costs and prices; and a financial aid system that is less focused on the nation’s need to improve college access and attainment. Current approaches to higher education finance, including some of the policy and practices described above, poorly address these symptoms and may, in fact, exacerbate the underlying condition of underperformance. Additional public investment is essential, especially in need-based student aid. However, if the nation and the states are to realize improvements commensurate with their investments, they must raise and answer critical questions of fairness, efficiency, effectiveness, incentives, and accountability.
The pending report of the Secretary’s National Commission on the Future of Higher Education suggests that the problem of the higher education finance system is that the system is “dysfunctional.” The report singles out the federal financial aid system as particularly in need of fundamental overhaul. The cumulative finding of the four Measuring Up report cards since 2000 strongly support the Commission’s conclusion.
The context for policy discussion and debate about college affordability must be the core public purpose of American higher education: That is, assurance that all Americans, regardless of economic status, have the opportunity for college-level education and training that will enable them to fully participate in the civic, economic, and cultural life of our nation.
Patrick M. Callan
President of the National Center for Public Policy
and Higher Education.
1. Michael Anft, “A Growing Debt to Society: Young graduates shun nonprofit employers,” The Chronicle of Philanthropy, volume 18, 2006; Amanda Ballard, “Understanding the Next Generation of Nonprofit Employees: The Impact of Educational Debt,” unpublished draft paper, 2005 (available at www.buildingmovement.org/artman/uploads/educational_debt_001.pdf).
2. John Immerwahr, “Public Concerns About the Price of College.” In Losing Ground: A National Status Report on the Affordability of American Higher Education, San Jose, CA: The National Center for Public Policy and Higher Education, 2002.
3. Deborah Wadsworth, “Ready or Not? Where the Public Stands on Higher Education Reform,” in Richard H. Hersh and John Merrow, eds., Declining by Degrees: Higher Education at Risk, New York, NY: Palgrave McMillan, 2005.
4. Figures are calculated based on the data from Trends in Student Aid and Trends in College Pricing (College Board, 2005, New York, NY: College Board),
5. College Board, Trends in Student Aid, New York, NY:College Board, 2005.