Rising College Costs Hit the Poor the Hardest

by James A. Bacon

In 2009 President Barack Obama set a goal for the United States to have the highest proportion of college graduates in the world. To reach that goal, more than 65% of individuals between 25 and 34 need to possess a college degree. Things aren’t working out well.

Conclude the authors of a new report, “The Effects of Rising Student Costs in Higher Education,” by Ithaka S+R, a not-for-profit consulting and research service:

Declining state appropriations and increasing reliance on tuition revenue have substantially increased the cost of public education to Virginia students, and the trend has accelerated since the Great Recession that began in 2007. Rising costs have deterred students from remaining in college and completing their degrees, and the lowest-income students have been hit the hardest.

Drawing upon an exceptional richness of data in Virginia, the authors of the Ithaka report used the Old Dominion to illustrate trends that are national in scope. Like Virginia, other states have cut state support for higher education, and colleges and universities have increased tuition and fees aggressively to make up the difference. While higher ed institutions also have bolstered financial aid to lower-income students, that aid has not kept pace with the increase in tuition and fees. The inflation-adjusted net cost — defined as the difference between a student’s estimated cost of attendance and total amount of gift aid — has risen steadily.

Source: “The Effects of Rising Student Costs in Higher Education”

Between 1997 and 2007, net costs for the poorest quintile of Virginia students actually fell, while it rose for middle-class and affluent quintiles. But the trend has reversed in the past five years, with net costs increasing more rapidly for the poor. (While the report does not emphasize this, the net cost for lower-income students is less than two-thirds that of the most affluent students, and their net costs have risen less rapidly over the entire 15-year period.)

Source: “The Effects of Rising Student Costs in Higher Education”

The Ithaka report distinguishes between what it terms “Lower Dependence on the State” (LDS) institutions and “Higher Dependence on the State” (HDL) institutions. (The institutions deemed less dependent include The University of Virginia, College of William & Mary, George Mason University, Virginia Military Institute, Virginia Military Institute, Virginia Commonwealth University, James Madison University and Virginia Tech.) LDS institutions have more flexibility in their tuition strategies and have been more successful in recruiting out-of-state students willing to pay the full freight. HDS institutions are dominated by in-state students and have fewer resources to provide financial aid. Those institutions find the current environment especially challenging:

Tuition charges may be reaching their market limit at many of these institutions, and further increases could both adversely impact institutional finances and endanger the goals of ensuring quality and broad access for students across the state. HDS institutions, in particular, appear to have reached — or come close to — this limit, as they were unable to increase tuition charges enough to offset the most recent funding cuts and have thereby seen declines in total revenue per student. …

These financial strains may force institutions to choose between sacrificing either access or quality (or some combination of both), particularly for low- and middle-income students.

If the public goal is to educate and graduate as many students as possible from four year students and to reduce gaps between socioeconomic groups, concludes Ithaka, something has to change. Ithaka recommends increasing state support for higher education and targeting those funds to reduce net costs for lower-income students. Also, recognizing the limited ability of state legislatures to increase funding, the authors also urge colleges and universities to “re-engineer their systems to become significantly more efficient … which means that they have to find ways to adjust their own underlying costs.”

Bacon’s bottom line: The Ithaka study has many useful things to say, but I question the underlying premise — that it is feasible for 65% of future generations of Americans to graduate from four-year institutions of higher learning. I would advance the proposition, for purposes of stimulating discussion, that (a) the goal is unachievable given the current state of K-12 education in America today, and (b) it does a dis-service to lower-income students who lose income by attending college instead of working, rack up significant student debt and never end up acquiring the credential — a Bachelor’s Degree — that will improve their opportunities in the job market.

The fact is, Virginia high schools are graduating thousands of students who are ill-prepared for college. Poor students drop out at a disproportionate rates not only because finances are a burden, but because they often find the course work to be beyond their capabilities. Expanding college enrollment without addressing the disparities in education at the K-12 (or even the pre-K) level is setting up poor students for failure and a lifetime of indebtedness. Under the guise of doing good, this policy does great harm.

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13 responses to “Rising College Costs Hit the Poor the Hardest”

  1. “The goal is unachievable given the current state of K-12 education in America today.”

    Jim, I think you need to explain the basis for that statement. We are talking about expanding college, not fixing what occurs before college. But of course you are right, they are parts of the same problem. Obama, for example, seems to talk about college as though it ought to be part of every kid’s upbringing, hence a part of the public obligation to provide an education to every citizen. I think he’s right that for many families, continued their childrens’ education after high school is assumed, it’s not an option, regardless of whether the kid wants to go to college or is prepared to take advantage of it, at a cost to the parents and to the child which is huge. And I think he’s right that economic status and race are associated disproportionately with those families whose children DON’T go on to college. But simply sending every kid to college without somehow preparing the kid for college will amount to warehousing.

    Is there a better way? In Europe there’s a critical fork in the publicly funded education path: one path leads towards a liberal arts institution and the other towards a job-training institution. The student’s own performance to date and on tests is supposed to determine which fork is pursued. It’s not a perfect system but it has these features which differ sharply from our own: it’s oriented toward what the student is capable of, not what the parents can afford; it presumes that that capability can be measured before it is developed; and either path is offered in some guise at public expense, although there are elite institutions that charge a great deal and offer more options.

    What do we want out of our educational system for our children older than 17? Is this post-secondary opportunity one that our U.S. workforce doesn’t really need, it’s just a luxury that only the scions of well-to-do families should expect? Well, no, we moved beyond that view when we passed the GI Bill for our veterans, and in this day when obligatory military service no longer exists, we “help” everyone else go to college with income redistribution and loans, the former as a kind of tax, and the latter on the theory that anyone motivated enough to willingly incur all that debt must be capable of benefiting enough from the experience to pay it off and come out ahead.

    I think we need to re-examine the basic mechanism for funding what we call higher education for those with lower income. It should be public funding, and it should come from general tax revenue, not from a surcharge on those who can afford to pay extra and a large pool of ‘lower middle class’ folks who cannot but are motivated to send their kids to college at any cost. I think the Tennessee approach here is worth a very close look.

    But along with that we need to re-examine what options we offer to these students at public expense. It should not, of course, be anything goes for as long as the student wishes to avoid working and pursue an “education.” I do not know where to draw that line. I only know we cannot afford to include residence at a full four-year liberal-arts college for everyone at 100% state expense. But a community college? Maybe.

    So I guess you’ve posed the right challenge, Jim, but it’s not easy to parse the problem into its many challenging parts.

  2. Darrell Avatar

    So during the time of this study, what was the money spent on? Did it buy more test tubes or just fancier landscaping?

  3. Steve Haner Avatar
    Steve Haner

    “…it does a dis-service to lower-income students who lose income by attending college instead of working, rack up significant student debt and never end up acquiring the credential — a Bachelor’s Degree — that will improve their opportunities in the job market.”

    So get them to finish. Do what is necessary to keep them engaged. If they drop out, it shouldn’t be for financial reasons. Right now it usually is.

    A “low income” student who attends college doesn’t really have a huge opportunity cost. What high-paying job is his or her alternative use of the time? It is the “significant debt” that puts them behind, and the solution there is to provide low cost alternatives and increase financial aid (and to end the annual tuition increases that are triple inflation). While not all high school grads are college ready, plenty are — and plenty of those are from lower or lower-middle income families.

    And while it might be unrealistic to assume 65 percent of future high school graduates will go on to four-year degrees, it is absolutely vital to the success of this nation that 65 percent or more move on to some form of higher education, even if the goal is an associate’s degree or even a job training program. Even if high school is remade into the European model, with a vocational outcome for a substantial percentage, the training and education won’t stop there.

    The first time I saw this study you cite, Jim, my reaction was “well, duh.” The price goes up and the poor are least able to to pay. Whether that is a degree or a car, that strikes me as pretty obvious.

    1. “So get them to finish.” Right.

      “If they drop out, it shouldn’t be for financial reasons. Right now it usually is.”

      Why is that? If a student can borrow the money need to attend college while in college why would that student drop out for financial reasons?

      1. Steve Haner Avatar
        Steve Haner

        Because he or she 1) cannot qualify for the loan or 2) is understandably concerned that the cost will exceed the benefit.

        1. Hard to imagine how many students are unable to qualify for loans given the total amount of student loans outstanding and the meteoric growth in that total. Who is being disqualified from getting these loans?

          As for the cost / benefit – good. If a student drops out because he or she decides that the financial benefits of getting an education don’t cover the costs of that education they have made an informed decision as a consumer. Would you really prefer that taxpayers fund the education whether the student thinks it’s worth the money or not?

  4. Les Schreiber Avatar
    Les Schreiber

    As a proud graduate of the Europe Institute of the University of Amsterdam and a former secondary school teacher at the Governor’s School in Richmond I very well aware of the problems in the US and of the pluses and minuses of the American system. The American system is based in the theory that everybody must have the same opportunity.
    The reason many students are ill prepared for university are the problems in k12.Students from poor areas are not given the level of instruction to bring them up to some standard that would prepare them for post high school. Make the school year longer,stress Stem,give them the type of individual instruction to compensate them for what they are not getting at home.It would be expensive in the short run,but pay dividends in the long run. Yes, hold teachers accountable.Give them goals and monitor their progress.If they don’t meed the stated goals fire them.If they do-pay them.We live in a market economy in every area but this one-education. And yes ,get rid of all the extracurricular trash that robs teachers of so much instructional time.If my friends in Amsterdam wanted to see “football”, Ajax was a short tram ride away.
    Testing is important. The attempt to establish common core in the US is small potatoes to what happens in Europe. Students are tested and tracked from a young age.Not only does this reflect on the student,but it is a test for the teacher.For those on the continent whose test scores do not indicate a university in their future ,the system provides alternative routes to a career.Unlike the US,it is accepted that university is not for everyone and it is the role of government to provide a path that provides for all to earn a living.
    The other question that needs discussion is that role of higher education as a transmitter of culture and democratic values. Do Art,philosophy,and other forms of intellectual activity play a that do not lead directly to the labour market still play a role or will they become activities for those wealthy enough to spend time exploring those areas.

  5. One more idea – fire the public college presidents who can’t keep their costs roughly in line with inflation. Terminate them for cause. Are you listening Teresa Sullivan?

    1. TooManyTaxes Avatar

      Well stated. Count debt service as Opex for measurement.

      It reminds me of discussions with Fairfax County Public Schools over the years. When confronted with high overhead, the Schools always responded everyone on the payroll was critical. After the recession hit and especially after Dr. Karen Garza took over, the staff jobs were cut. The high non-obligated reserves (read slush funds) were also cut.

      Education carries an awful lot of fat and has very little credibility on fiscal matters.

  6. One more thing – Section 11 of the Virginia Constitution describes the enactment of laws. It has very specific rules for the enactment of taxes. UVA’s efforts to charge one group more more money for a common product in order to subsidize another group is a tax. It is not a de-facto tax, it is a tax. I question how a state entity can impose a tax without legislation. Beyond the questionable constitutionality of this I did not elect Teresa Sullivan or any other member of the Board of Visitors. Shouldn’t our hapless state government at least insist that taxes are only imposed by elected representatives who have to stand for re-election and defend their taxes?

  7. There’s lots here to digest as one contemplates just one more hit that the poor take in their lives and strivings in America. But besides the essential focus on better education K-12, is the increasingly evident need for pre-K “education” by parents through reading aloud, speaking, and stimulating young children’s capacity to enhance their vocabulary, their curiosity, and their self confidence. I see it in spades in those benefits my grandchildren received well before school. Without those benefits, even the best k-12 has limitations.

  8. Hill City Jim Avatar
    Hill City Jim

    Keep dropping the standards and 100% can go to college and graduate.

  9. there is a misunderstanding here between “college” and post K-12 education in my view.

    the world we live in today – requires MORE than a K-12 education but that does not necessarily mean a 4yr liberal arts or even a hard-core STEM education.

    we keep talking in a 20th century context about a 21st century issue and the bottom line is – that fewer and fewer jobs are available for those who stop their education at the 12th grade.

    w can continue to believe it’s up to mom and dad to pay for post K-12 but the reality is when many – rich or poor turns 18 – no matter what mom and dad did with their life – is ready – to pursue what it takes to – earn a living.

    and I guess this gets to the point where some folks think the govt should not be involved in education to start with and they just tolerate the k-12 because it’s traditional.

    other’s hopefully understand the connection for all of us in paying for entitlements for those who fail to get a 21st century education.

    I know it sucks – but the world is moving forward and those mired in the status-quo are not going to move us forward.

    A k-12 education + two years of community college is the new standard.

    you can like it and own it or you can go play ostrich – but the world is moving on and if we want to see the USA go from 25th in education to 40th while claiming fiscal virtue…. the so be it.. but at some point – we’re going to have to admit that “ignorance” has many faces beyond the current stereotypes

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