Issue #10, Fall 2008

Back to School

To assure higher-education access for all, we need more than just elite handouts for the lucky few.

This fall, like every year, nervous parents are delivering their sons and daughters to America’s colleges and universities, replacing the cheering families who each spring happily anticipate useful and, yes, remunerative careers for their newly graduated offspring marching through auditoriums, college greens, and football stadiums. In laudatory speeches marking these commencement exercises, college officials frequently tout the collective prowess of U.S. higher education, along with the special strengths of their own institutions. At the conclusion of her first year in office last June, Harvard University President Drew Gilpin Faust joined this venerable rhetorical tradition. “American higher education is the most valuable educational resource in the world,” she intoned to the assembled alums of the nation’s oldest college. “The genius of the American system of higher education is that it has managed to combine broad access with unsurpassed intellectual distinction.”

But the synthesis of excellence and access celebrated by Faust is rapidly coming undone. U.S.-based universities continue to rank at the top of lists put together even by foreign assessors of relative institutional excellence, and America is admired across the world for its historic primacy in offering higher education to the many, not just the few. At home, the faith of Americans that higher degrees and advanced research are central to social opportunity and economic vitality has, if anything, only intensified with the advent of the information revolution and the post-industrial economy. But the United States no longer leads the world in the attainment of college degrees, and there are growing imbalances in popular access and resource gaps among institutions of higher learning that threaten to turn higher education from a great equalizer of opportunity to a force that deepens inequality.

Perhaps that is why this past year also witnessed a mini-drama between the Senate Finance Committee and the leaders of the nation’s wealthiest private universities. Grabbing the media spotlight at a time when tax-exempt private universities are building ever more eye-popping endowments (per capita leaders like Princeton and Stanford have more than $1.5 million per student, and Harvard’s absolute total has now reached $38 billion), the Committee’s ranking member, Senator Charles Grassley, Republican from Iowa, proposed that universities be required to spend at least 5 percent of their income each year (as private tax-exempt foundations are already required to do).

This alarmed the leaders of super-rich colleges, and they parried by creaming a bit of endowment-return froth to lower net tuition and expenses for middle- and upper-middle-class students, as well as for lower-income enrollees. A wave of commentary followed. While some praised private college largesse, regional newspaper reporters often explained, as did the Seattle Post-Intelligencer, that “few” other colleges “can afford to follow the Ivy League…The ripple effect of decisions by Harvard and Yale…isn’t going to produce a tidal wave of new chances for economically disadvantaged youngsters. In fact, the opposite is more likely, with students from relatively well-off families filling many of the slots that might be available for those from low-income brackets.” Op-ed critics chimed in, pointing out that the options open to the Harvards, Princetons, Yales, and Stanfords of the world are light years from the tough fiscal trade-offs faced by the modestly endowed universities and tax-starved community colleges that a vast majority of Americans attend. “Bravo for Yale and Harvard, but what about the rest?” asked Berkeley Chancellor Robert J. Birgeneau in USA Today.

The debate did little to expand college access, but it did dramatize why fundamental solutions must involve more and better-directed resources from the federal government, not just regulatory gimmicks that induce charity from the richest universities. Historically, U.S. higher education evolved very differently from European and other foreign systems, which use state-funded universities to channel a few highly selected elites into national bureaucratic service. In America, private benefactors, churches, and state governments promoted a raucously decentralized, competitive hodge-podge of thousands of colleges and universities, collectively offering many more citizens routes into all kinds of vocations. Nevertheless, the U.S. federal government has long used public expenditures, regulations, and tax breaks to leverage access and institution-building. Especially after the Civil War, when the land-grant university system spread higher education across the country and into practical areas of knowledge, and again during the golden era following World War II, when the GI Bill expanded student access and science grants fostered widespread research capacities, the federal government played a pivotal role in shaping a capacious and inclusive system of higher education.

However, the federal role has shifted since the 1980s, contributing–along with private and state-level choices–to diminished access and institutional disparities. The time has come to redirect federal efforts–to focus on expanded grants and simplified loans for low- and middle-income college students, and to build the capacities of the public community colleges and universities to open doors of opportunity for the many, rather than cater to the wealthiest and luckiest few.

The Closing College Door

On June 16 and 17, during his early summer “economic tour” through several swing states, Senator Barack Obama visited two college campuses in Michigan. Both were non-elite campuses–Kettering University in Flint and Wayne Community College in Taylor–where, as the Detroit Free Press explained, “Paying for education is a daily struggle for countless students…as tuition has increased while state subsidies to universities have fallen.” These were just two institutions of higher learning, chosen because of their location in a politically pivotal state. But the struggles faced by their students are emblematic of the sorry state of American higher education.

Before World War II, a broad network of public and private colleges was well in place, but the Depression hurt the fortunes of both, and higher education remained an elite affair into the 1940s. Then, suddenly, the doors to higher education swung wide open. The U.S. population grew by 54 percent between 1945 and 1975 (from about 140 million to 215.5 million), yet the number of students enrolled in higher education exploded by 567 percent (from about 1.7 million to about 11.2 million), and the number of earned degrees of all types grew more than tenfold, from 157,349 in 1945 to 1,665,553 in 1975. Expansion of state universities led the way, but universities grew across the board. Prominent among the college entrants and attainers of degrees were millions of young men from modest backgrounds, who were able to complete college on the GI Bill. Advances for other groups, including women and minorities, followed.

Since the 1970s, however, not only has enrollment expansion slowed, but social opportunity has constricted, despite the heightened value of a college degree. In 1979, the “premium” for an American worker who had completed a college degree was about 1.4 times the income of a worker who had not completed a degree–and that premium grew to 1.75 by the end of the century, where it remains today. Families obviously have a greater incentive to send offspring to college, and the proportion of 18- to 24-year-olds enrolled has indeed grown by more than a third since the late 1970s. Still, the overall enrollment increase has lagged the rising wage differential, and the response has been especially sluggish lower down the income ladder. Class gaps in enrollment have expanded in the past several decades, and so have racial gaps between whites and blacks (even in an era when U.S. blacks have become increasingly likely to graduate from high school).

More than a third of a century ago, in 1970, 6.2 percent of the U.S. population in the bottom income quartile had completed a baccalaureate degree by age 24–and that percentage actually declined slightly, to 6 percent, by the year 2000. Lower-middle-income young people from the second (to the bottom) income quartile improved their college completion rates only slightly from 1970 to 2000, from 10.9 percent to 12.7 percent. But note the contrasting trajectories for young people in the upper half of the income distribution. For those in the third quartile–solidly middle-class families–completion percentages rose markedly, from 14.9 percent in 1970 to 26.8 percent in 2000. And for the most privileged young people, those from upper-middle-class and upper-class families in the top quarter of the income distribution, college completion rates rose from 40.2 percent in 1970 to 51.3 percent in 2000. Compared to the mid-twentieth century, higher education is now increasingly exacerbating socioeconomic inequality in the United States. Its success at fostering upward mobility has diminished sharply.

Many factors combine to explain deteriorating access to college for less privileged Americans: problems in the K-12 educational system, the effects of post-1965 immigration, and the impact of changing family structures and practices. But institutional policies, both public and private, also played a prominent role. In the 1960s and 1970s, college tuitions rose relatively modestly compared to inflation and family incomes, but thereafter took off. As education expert Tom Kane explains, “Between 1965 and 1980, the average tuition at a private four-year college rose only 22 percent faster than inflation. However, between 1980 and 1999, tuition at private four-year institutions rose 136 percent in real terms. After rising by 17 percent in real value between 1965 and 1980, the average public four-year tuition rose by 114 percent between 1980 and 1999.” Nowadays, the in-state cost of over $13,000 for a year at a public college can equal a large chunk of the annual income of a poor or lower-middle-class family. Given the obvious costs they would have to struggle to pay directly or by taking on debt, many lower-income and modest-income families do not understand the putative value of future income gains of higher education. This helps explain why less privileged young people with the highest test scores attend college at substantially lower rates than their privileged age-peers with the same scores (and the enrollment gap is even wider between high- and low-income students with the lousiest scores).

At the same time, public grants and subsidies have failed to keep up with rising education costs, and the process of obtaining aid has become harder for people without tax accountants to guide them through it. From the GI Bill of 1944 through the enactment of Pell Grants in 1973 (voucher grants to help low-income students), federal college aid policies stressed grants to make college predictably affordable. But from the 1980s on, the bulk of federal programs shifted toward student loans, with the government providing subsidies to banks to encourage them to lend to student borrowers–and more recently, toward tax credits as well. Typical indebtedness for college graduates who take loans has risen sharply, and it is now at about $20,000 on average, a daunting amount for young people from the least, or simply less, privileged backgrounds.

Moreover, recently favored federal policies stressing guaranteed bank loans and nonrefundable tax credits help the privileged disproportionately, in effect subsidizing college costs for families whose children would have attended anyway. In the meantime, Pell Grants for low-income students–notwithstanding recent increases–have been allowed to deteriorate in real value. In 1975, maximum grants covered 84 percent of the cost of a public education, but by 2006 the subsidy had shrunk to less than a third of the cost. According to education experts Ted Mitchell and Jonathan Schorr, in 1995 38 percent of students enrolled in four-year public institutions came from Pell Grant-eligible low-income families, but that percentage dropped to 28 percent in 2003. And of course Pell Grants cover even less of the cost of private college attendance for the modest numbers of low-income students who can manage to gain acceptance to such colleges. Some states have grant programs of their own, but in recent years much state aid has shifted toward “merit scholarships,” which are likely to be won by middle- and upper-middle-class students, thanks to better educational resources and access to college counseling. And still another aspect of the aid system that is highly detrimental to low-income families is its opaqueness and unpredictability. Families rarely know up front when their children must apply to college and how much help they will qualify to receive–especially the total they might expect from state, national, and private sources combined.

As these trends have played out, according to a 2007 OECD report, “the United States has moved from first place for higher education attainment levels among 55-to-64-year-olds to fourth place among 35-to-44-year-olds and tenth place among 25-to-34-year olds.” In the youngest age cohort, Belgium, Canada, Denmark, France, Ireland, Japan, South Korea, Norway, and Spain have all overtaken us–a startling development for the one-time world leader in access to higher education and a worrisome development in an ever-more-competitive world economy. America is arguably no longer using higher education to expand opportunity; higher degrees are becoming tools of class consolidation instead. Can America’s economy and polity flourish while the potential of so many of our young people remains untapped and underdeveloped?

The Chimera of Charity

Given the partisan deadlock and fiscal obstacles in Washington, some in Congress are trying to address cost increases in higher education with cheap regulatory gimmicks, such as mandated payouts from the richest college endowments or a “watch list” ranking colleges by their rate of annual tuition increases. But “watch lists” can end up hurting poorer colleges that must boost top tuition rates (paid by the wealthiest) to survive or improve, while lower prices at the Harvards and Stanfords of the world can, ironically, end up making things worse for most U.S. students and their families as the effects reverberate through the entire system of competing colleges and universities, creating a “keep up with the Joneses” effect that hurts all but the wealthiest institutions.

Issue #10, Fall 2008
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Nick Hillman:

Thanks for the great article. As a graduate student of higher ed policy, let me tell you that it's refreshing to see such highly regarded scholars focusing attention in this direction. We need it.

There are far too many regressive redistributive schemes within higher ed finance (i.e. 529 plans, tax credits, "merit" aid programs, etc.) that disproportionately benefit middle and upper income families. By framing these policy debates through the lens of social justice, we can clearly see that our current financial aid "system" is inefficient and inequitable and must be reformed.

It's a sad state of affairs when our national leaders push these issues to the political back-burner, letting these inequalities continue to mount on top of each other.

Sep 15, 2008, 7:49 AM

Recently, 400 students in good academic standing were forced to leave Tennessee State University because they were unable to pay their tuition and other expenses. Nine hundred more students were able to remain at the university only by using funds generated through an emergency fund raising drive; their financial situation remains precarious. Some of the students who left school for financial reasons may return. Many will not. Often, the students most in need of financial assistance are the students who work several part-time jobs to defray their expenses and may have trouble keeping their GPAs high enough to qualify for or retain merit scholarships, something that would not pose a problem for them if they were able to apply the time and energy they use on the job to their studies, instead. In the late 1960s, I attended the city campus of a land grant university, worked a part time job, and lived at home. Courtesy of my wages, some help from my mother (and, after she died, a small survivor's benefit from Social Security), and an Illinois State Scholarship, I graduated without debt. That would likely not be possible today.

Sep 18, 2008, 3:42 PM

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