Making Higher Education More Affordable

Over the past couple weeks, affordable education, and the Obama administration’s related policy proposal, has been a highly publicized area of interest. In the new economy, higher education is an important investment for students working to ensure opportunities and success for their future.  A good example of this can be seen through the unemployment rate—it is a clear indicator of the benefits of higher education—showing considerable variation based on education status. For individuals with just a high school diploma, the unemployment rate in 2012 was 8.3%, as opposed to individuals with a bachelor’s degree at just 4.5%. Median weekly earnings also jumped to $1,066 for those with a bachelor’s degree, compared to $652 for those with only a high school diploma. The new job market is transitioning into a higher skilled workforce, and anything less than a college degree is frequently insufficient to maintain a position within the middle class.

However, the costs of higher education limit who can access these benefits, often leaving low-income families far behind. Many families are forced to choose between a heavy student debt load or skipping college altogether.  College is too important a benefit to professional success and financial security for this to be a decision that families have to make.

According to the White House Fact Sheet on the President’s Plan to make college more affordable:

• The average tuition at a public four-year college has increased by more than 250% over the past three decades, while incomes for typical families grew by only 16%.
• Declining state funding has forced students to shoulder a bigger proportion of college costs; tuition has almost doubled as a share of public college revenues over the past 25 years from 25% to 47%.
• The average borrower is now graduating with over $26,000 in debt.
• Only 58% of full-time students who began college in 2004 earned a four-year degree within 6 years.
• Loan default rates are rising, and too many young adults are burdened with debt as they seek to start a family, buy a home, launch a business, or save for retirement.

As part of the Obama Administration’s plan for a Better Bargain for the Middle Class, there have been three alternatives proposed to make college more affordable: pay for performance, promote innovation and competition, and ensure that student debt remains affordable. Paying for performance includes tying financial aid to student outcomes instead of enrollment rates, in addition to identifying colleges that do the most to assist students from disadvantaged backgrounds as well as colleges that are improving their performance.This information will be available on a college “scorecard.” The administration plans to spark innovation and competition by highlighting colleges where innovations are enabling students to achieve good results. Lastly, the “Pay as You Earn” plan caps federal student loan payments at 10% of discretionary income, so students have more flexibility in managing their debt.

Although these alternatives offer some promise and developing new solutions is a step in the right direction, more policies and programs to increase affordability for college are necessary for students, especially those who are first-generation, those who come from disadvantaged circumstances, students with disabilities, and many others who come from non-traditional backgrounds.  

For results-focused state strategies aimed at increasing college completion, visit PolicyforResults.org