THESE days, politicians on both the left and the right are very critical of higher education, especially the cost of attending college and the related debt that students and their families incur. But there is more to college affordability than lower prices.
While calls to reduce tuition sound terrific, neither of two recent proposals for reform would sufficiently target the students most affected by rising college costs and debt burdens: those from middle- and low-income backgrounds. To get those students to and through college, we must focus on what they are asked to pay, not on making it free for everyone.
Senator Bernie Sanders of Vermont has called for free tuition at public institutions, which would cost taxpayers $70 billion a year, while Representative Tom Reed, Republican of New York, wants to require private institutions with endowments of more than a billion dollars to use them to lower tuition, to zero if possible. Those proposals ignore the fact that it is declining state support for public institutions that has shifted a much larger burden of college costs to students and their families, increasing both tuition and debt.
If the revenue is not replaced, free tuition means fewer resources to teach students. Unintended consequences could include reductions in need-based financial aid, which would harm the low- and middle-income students free tuition is meant to help.
Last year, the average cost of tuition and fees was $9,139 at four-year state schools and $31,231 at private nonprofits. Any policy reducing tuition to zero would primarily benefit students whose families earn the most, who currently pay all or nearly all of a school’s full tuition price because they can afford to. Lowering tuition would have less impact on moderate- and low-income students if they already receive some need-based financial aid grants that reduce what they are asked to pay — known as the “net price.”
Between 60 and 75 percent of students at four-year public and private nonprofit institutions receive grant aid that meets need and reduces their net price. Many private, nonprofit colleges and universities with large endowments allocate significant amounts to need-based aid. At Vassar, where I am the president, families with incomes below $30,000 are asked to pay $4,456 a year (on average) for tuition, fees, room and board (which costs $63,280). For families earning $48,001 to $75,000, the average net price is $11,817.
The Department of Education’s new online College Scorecard, which reports these data for many schools, makes it clear that too many institutions, both in the private and public sectors, are not affordable for low- and moderate-income families. Rather than free tuition, we need targeted policies that result in more money for need-based aid, from both public and private institutions, and from both state and federal governments.
While lower net prices would reduce the need for students and their families to borrow for college, federal student loan programs will remain an important tool to improve college access. Even zero tuition wouldn’t eliminate the need for loans, since room, board and travel expenses would still be a constraint for some students.
These loan programs merit closer scrutiny because the government extended about $96 billion in student loans last year, and $1.2 trillion in loans are currently outstanding. The trillion-plus figure is certainly eye-catching, but part of the increase in total debt is a result of more students going on to higher education, which is a good thing.
At first it seems like the increased borrowing per student and the number of student loan defaults prove that these programs are overextended and misguided. But for those students who graduated with a bachelor’s degree in 2013-14 from public and private nonprofit four-year institutions, the average amount of debt was $26,900. This is more than justified by the increased average earnings resulting from a bachelor’s degree.
A significant portion of the recent increase in defaults comes from students who borrow money to attend for-profit institutions. While those students account for about 9 percent of higher education enrollments, they account for 20 percent of federal loan borrowing and 44 percent of all federal student loan defaults (as of the end of September 2013). Fortunately, increased regulation of those companies is underway.
Some students who attended public colleges and private nonprofits are also having trouble paying back their loans. Defaults are more likely when borrowers don’t graduate with a degree or certificate, so improving completion rates is important. Providing better counseling and better options — including longer repayment periods and repayment plans based on earnings — will also help ensure that more students can pay back their loans.
Being able to borrow for education increases students’ options. Sometimes they choose a higher-cost school as a better investment, because of stronger academic programs and a higher graduation rate, even though it might involve more debt. Without federal loan programs, many students could attend only schools that their families could afford from their current incomes and savings.
For wealthy students this wouldn’t be a constraint. Students with less money would be forced to choose options at lower cost and lesser quality, or not to pursue higher education at all, which hurts not just them but society as a whole.
If free tuition weren’t an indiscriminate solution, it might be a worthwhile plan. But if our real goal is to improve college access and affordability for students from low- and moderate-income families, as it should be, stronger need-based financial aid policies and well-structured borrowing are a far better strategy.
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