by Dr. Mark H. Shapiro
"Think what you do when you run into debt; you give another power over your liberty.".... ...Benjamin Franklin.
Commentary of the Day - March 22, 2006: College Costs Are Stifling Upward Mobility.
It's no secret that going to college has become an expensive proposition these days. According to the College Board tuition and fees for four-year private colleges averaged $21,235 for the 2005-06 academic year, which was up 5.9% from the previous year. Tuition and fees for four-year public colleges averaged $5,491 during the same period (up 7.1% from the previous year), and for two-year community colleges the average was $2,191 (up 5.4% from the previous year). These tuition costs were offset by grants that averaged $1,800 per student at two-year colleges, $3,300 per student at public four-year colleges, and $9,600 per student at private four-year colleges.
Public colleges and universities, while still a bargain in comparison to the private institutions, have seen a major erosion in state and local per-student support. A recent story by Karin Fischer in The Chronicle of Higher Education (March 22, 2006) notes that per-student support fell to a 25-year low in fiscal year 2005. In 2000 state and local spending on higher education reached $7,121 per student -- a 25-year high (adjusted for inflation). But, by 2005 state and local spending had dropped to $5,833 per student (again adjusted for inflation). State and local governments are struggling to keep up with growing enrollments. State and local spending on higher education is increasing, but at only about half the rate that costs are increasing.
Tuition obviously accounts for only a part of college costs. For a student living away from home, room and board, transportation, clothing, incidentals, and books easily can add another $10,000 to $15,000 per year. Students who live at home and commute to college can reduce these costs significantly, but still can expect another $3,000 to $4,000 in yearly expenses beyond tuition and fees. Grants and scholarships help, but most students will find that these cover much less than half of their college costs. The bulk of college expenses have to be met with a combination of family support, loans, and the student's own income. However, with college expenses increasing at twice the rate of inflation or more, many students who have the grades and talent to go on to a four-year college are finding themselves unable to afford that path. The two-year community colleges offer a much less expensive alternative; however, a relatively small percentage of those students who start their higher education at a two-year college ever obtain a bachelor's degree.
The economic advantages gained from higher education sometimes are questioned, but the available Census Bureau data show that during the period from 1975 to 1999 only those adults who held bachelor's degrees or advanced degrees showed any significant gain in real income. For high school graduates real income was essentially flat during that period, and real income for those who did not graduate from high school actually declined. While a college degree does not guarantee that a person will move upward in socioeconomic status, it certainly is one of the key factors.
However, the rapid inflation in college costs over the past decade or more has made socioeconomic mobility much more difficult for young adults from families in the lower income brackets. An article by William C. Symonds in the February 27, 2006 issue of Business Week includes statistics that shed some light on the issue. The differences are stark at the nation's most elite colleges and universities. Nearly 75% of the students at these 147 institutions come from families that are in the highest income quartile, while only 3% of their students come from families in the lowest income quartile. Public four-year colleges are more affordable, but still out of reach for many students from low-income families. Financial aid in the form of grants and loans at these colleges covers only fraction of the costs. The remainder must be met from family income or savings. For families in the top income quartile this burden is not excessive, only about 11% of family income; but, for families in the bottom quartile the burden is about 47% of the family income.
These differences have created a socioeconomic enrollment gap. Nearly 65% of students attending four year colleges whether public or private come from the top income quartile, while only 14% come from the bottom quartile. And since 1988, 46% of the students from the top income quartile have earned a bachelor's degree by age 24 compared to only 8% of those from the bottom quartile.
The Pell Grant program has been one of the major sources of support for the college costs of low-income students. About 90% of the benefits from this program go to families with incomes below $41,000 according to data published by The Century Foundation. However, the purchasing power of these grants has fallen from about 60% of the costs of attending a public four-year college in the 1980s to about 40% today. At the same time that the purchasing power of Pell Grants has decreased, there has been a shift in federal higher education aid from grants to loans, many of which are tax-deductible. Recently, federal spending on Pell grants amounted to about $11 billion, while federal subsidies through tax breaks totaled another $11 billion.
Unfortunately, the bulk of the federal tax breaks for higher education go to wealthy families, since they have the highest marginal tax rates. In effect, these tax breaks are a subsidy for the rich. They only help to further the opportunity gap between students from low-income families and students from high-income families.
When the Irascible Professor was a freshman at the University of California, Berkeley back in 1957, he was able to get through a year of college for a little more than $750 for fees, books, room and board, etc. Scholarships provided $150, while the earnings from a summer job fighting fires for the U.S. Forest Service provided the rest. In today's dollars that $750 would be equivalent to about $4,500. However, today the same year of study at the University of California, Berkeley would cost approximately $22,150 -- nearly five times as much! Through a combination of scholarships, a Navy work-study program, and graduate fellowships the IP finished both an undergraduate degree and Ph.D. completely free of debt. Most low-income students today, if they go to college, can expect to owe tens of thousands of dollars by the time they graduate. And, if they continue to a graduate or professional degree their debt level often tops $100,000.
While opportunities for upward socioeconomic mobility still exist in our society, our policies towards the funding of higher education seem to be slowly choking off those opportunities.