The Tuition Crunch

A four-year college degree has become all but a necessity for getting ahead in the information age. Since the 1980s the average real income of workers with only a high school diploma has fallen, while salaries among those with at least a college degree have risen: they now earn 75 percent more than high school graduates. At the national level, having a highly educated work force is critical in order to sustain our technological edge in the global economy.

America's higher-education system ranks among its greatest achievements. But in the past two decades our commitment to equal opportunity in post-secondary education has deteriorated markedly. In 1979 students from the richest 25 percent of American homes were four times as likely to attend college as those from the poorest 25 percent; by 1994 they were ten times as likely.

Part of the problem is the skyrocketing cost of college. Since 1980 tuition and related charges have increased at more than twice the rate of inflation, rising by nearly 40 percent in real terms in the past decade alone. Public attention has focused largely on the $35,000-plus annual cost of elite schools like Harvard and Brown. The bigger problem rests with the public colleges and universities that serve 80 percent of the nation's students. In 2003 the University of Arizona's average annual tuition rose by 39 percent, to $3,604, and Iowa State's rose by 22 percent, to $5,028. For many low-income families increases like these are difficult to absorb. Indeed, the cost for such families of sending a child to a four-year public institution shot from 13 percent of family income in 1980 to 25 percent in 2000 (for middle- and high-income families the percentage barely increased).

Congressional Republicans, led by Representative Howard McKeon, of California, contend that universities are largely to blame for these tuition hikes. However, most experts agree that fluctuations in state spending are the principal cause of tuition increases at public institutions, which depend heavily on appropriations to subsidize their operations. As Arthur Hauptman, an expert on college financing, explains, in each of the past three economic recessions—in the mid-1970s, the early 1980s, and the early 1990s—state higher-education spending per student declined, forcing students and their families to shoulder more of the cost in the form of double-digit percentage hikes in tuition. Increases during the recent recession reflect the same pattern.

The tuition spiral is not the only impediment to equality of opportunity. More significant perhaps is the nation's backsliding on need-based financial aid. In 1975-1976 the maximum federal Pell Grant award (for low-income students) covered 84 percent of the cost of attendance at a public four-year college; by 1999-2000 it covered only 39 percent. This is part of a broader shift to a system dominated by loans, which has left a generation of students struggling to finance heavy debt.

Hardest hit are low-income students, whose numbers are expected to increase dramatically over the next decade. From 1989 to 1999 the average cumulative debt of the poorest 25 percent of public-college seniors grew from $7,629 to $12,888 (in constant 1999 dollars). Studies find that when financial-aid packages inadequately cover expenses, students work long hours, attend school part time, and opt for two-year as opposed to four-year programs—all of which reduce their chances of acquiring a bachelor's degree.

Federal efforts during the past decade or so to address rising tuition have done little to help low-income families. Both the Clinton and the George W. Bush Administrations promoted tax breaks and saving incentives encouraging families to set aside money for college. These programs largely benefited middle- and upper-income families, who have both taxable income and resources to save. With the Higher Education Act up for renewal this year, Congress should focus on aiding those students unlikely to complete—or attend—college without greater financial support, and should encourage universities to do the same. To begin with, it should restore the purchasing power of Pell Grants by raising the maximum award from the current $4,050 to $8,000. Many will argue that the cost—roughly $15 billion in additional annual spending—is unrealistic. Historically, however, our nation's investments in expanding access to higher education have paid off many times over. And the money required, according to a new Century Foundation publication, is roughly equivalent to the annual revenue lost to the Treasury from tax and savings benefits that currently help those higher on the income ladder. To relieve the extraordinary debt burden that many students face, Congress should also put the college-loan system under federal administration, and let every student consolidate loans and pay them off on an income-contingent basis, as one federal loan program already allows.

Broadening access to higher education has never been the answer to inequality, but it is the way to ensure that every young person has a chance to move upward in society. Either we can continue to ignore the persistent disparities in post-secondary training and rely increasingly on foreign students to fill our graduate-level science and engineering programs, or we can renew our commitment to educating the young people who are already here.