The high cost of higher education: part 2 of 3 in a series

Guest post by Laura W. Perna

The NPR segment “How the Cost of College Went from Affordable to Sky-High,” which was broadcast on March 18, 2014, touched on a number of important issues pertaining to the financing of higher education. Particularly problematic are the implications of declining college affordability for the economic and social stratification of our society.

People who enroll in and complete college realize countless benefits, including higher earnings and rates of employment, lower rates of unemployment and poverty, greater job satisfaction, better health, and longer lives. The economic benefits of higher education are not surprisingly, given that higher education is increasingly required for the jobs that are available in our global, technology-driven economy.

When college affordability declines, so does the opportunity for individuals to realize these benefits. The opportunity to participate in and benefit from higher education currently varies considerably across groups. For instance, compared with individuals from higher-income families, students from low-income families are less likely to enroll in college and, even among those who do enroll, are less likely to complete their programs and earn a degree. Students from low-income families are also relatively concentrated in the nation’s least-selective colleges and universities (including for-profit institutions), and represent relatively small shares of students at the nation’s most selective institutions. Further declines in college affordability will only exacerbate these and other differences in college-related outcomes across groups.

For many students—but particularly students from low-income families—“price” is a key determinant of college enrollment. Although the actual price that many students pay (that is, the net price) is lower than the advertised price (that is, the sticker price), determining the net price is challenging, even with the availability of the institutionally-mandated net price calculators. Also worrisome is the growing use of loans to pay college costs. More and more students are borrowing, and the amount that students are borrowing is growing ever larger. For those who are borrowing reasonable amounts, completing their educational programs, and obtaining jobs with salaries sufficient to repay their loans, borrowing is a good investment. But many students—including students from low-income families and/or the first in their families to attend college—are reluctant to use loans. This reluctance may be appropriate, given the risks associated with borrowing and the lower rate of completion for these students. The heavy reliance on loans in our nation’s current approach to higher education finance may cause some students to forgo higher education altogether and encourage other students to try to reduce college costs  by enrolling part-time rather than full-time and/or taking on additional hours of paid employment while enrolling. Although these strategies may help students pay college costs, they also often reduce the likelihood of finishing a degree program.

College affordability is influenced by the actions of many different entities. The federal government contributes to college affordability directly through the provision of need-based grants (e.g., the Federal Pell grant) and indirectly through efforts to simplify the federal application for student financial assistance. State governments can promote affordability by appropriating funds to institutions that offset the cost of producing higher education, providing need-based grants to low-income students, and encouraging institutions to reduce college costs. Colleges and universities can improve affordability for students by improving productivity and allocating financial aid to meet the full financial need of all students.

Declining affordability suggests that the current actions of these entities are not enough. If we are to reduce rather than increase the stratification of higher education opportunity and benefits, we must do more. Although many forces contribute to college enrollment and completion (including insufficient academic readiness), college affordability is certainly among the most important. Improving the affordability of higher education is one this nation’s most pressing challenges.

pernasketch1.inddLaura W. Perna is a professor in the Graduate School of Education at the University of Pennsylvania and the editor and coauthor of several books, including The Attainment Agenda: State Policy Leadership in Higher Education, published by Johns Hopkins, and The State of College Access and Completion: Improving College Success for Students from Underrepresented Groups. Perna is the executive director of the Alliance for Higher Education and Democracy (AHEAD). To listen to American Public Radios interview with Laura Perna click here.

To read the first installation in this series, a conversation with professor and scholar John Thelin, please click here.