Making College Affordable
By Dustin Weeden and Ben Schaefer | Vol . 23, No. 42 / November 2015
Did you know?
- The current outstanding student loan debt in the United States is more than $1.2 trillion.
- Tuition at public four-year institutions has increased 161 percent since 1990.
- Tuition at public two-year institutions has increased 102 percent since 1990.
College affordability is regularly on the minds of parents, students and policymakers. In the last decade, however, concerns about college becoming unaffordable have grown as tuition increases annually outpaced inflation and stagnant family incomes limited the ability of Americans to pay for the increases. Consequently, the number of people borrowing to pay for college and the average amount they are borrowing has increased by 89 percent and 77 percent, respectively. At the same time, a postsecondary education has become increasingly important for both individuals and the economic competitiveness of the nation and individual states. The federal government and state governments have taken several actions in recent years to ensure that college remains within reach of all Americans.
States primarily use three policy levers to influence college affordability—appropriations, financial aid and tuition. Direct appropriations to colleges and universities have been the largest state investment and have enabled institutions to discount tuition for state residents. However, recessions, competing budget priorities and increased enrollment have challenged the traditional arrangement. As a result, states have developed more innovative financial aid and tuition policy solutions.
Providing tuition-free access to community colleges has become a priority in several states. Minnesota, Oregon and Tennessee have created free community college programs, while 11 other states have considered legislation to do so. The three enacted programs are “last-dollar” scholarships designed to cover any unmet tuition and fee obligations after accounting for other federal and state scholarships. While all three programs are similar, each has unique aspects. Oregon guarantees that each recipient will receive a $1,000 scholarship, even if other forms of financial aid cover tuition. In Minnesota and Tennessee, each recipient is assigned a volunteer mentor to help navigate the college selection process.
Students who do not graduate on time and enroll in additional semesters add to the cost of their education. As a result, states have started using financial aid programs to create incentives for students to graduate on time by completing 15 credit hours a semester. Indiana restructured the state’s grant programs to award students who complete 30 credits during one academic year a bonus award of $300 to $400, depending on the type of institution a student is attending. Students who progress faster by completing 39 credit hours in a year will receive a $1,300 bonus award. In 2012, Massachusetts began implementing a similar pilot program, known as the Massachusetts Completion Incentive Grant Fund. Students who complete 12 credit hours receive $700, while students who complete 15 credit hours receive $1,000 each semester.
A few states have taken aggressive action to curb tuition increases. Washington enacted a tuition reduction of 5 percent for community colleges, 15 percent for research universities and 20 percent for regional institutions for the 2016-2017 biennium. Washington also tied future tuition increases to the average increase in median income, consequently linking the price students pay to the increase in families’ ability to pay. Some states tie tuition increases to other measures. For example, Missouri ties tuition increases to the rise in inflation. In Michigan, colleges and universities must keep tuition growth below a legislatively established limit to qualify for performance funding incentives.
The most notable federal attention to college affordability occurred in January 2015, when President Barack Obama unveiled his “America’s College Promise” proposal, modeled largely after Tennessee’s program and a similar one in Chicago. The proposal seeks to provide qualifying students with two free years of community college, with the federal government covering 75 percent of the cost for two years and states picking up the remainder. The proposal has yet to receive meaningful consideration in Congress.
Legislative proposals on affordability have been made in both the House and Senate, although reauthorization of the Elementary and Secondary Education Act (ESEA) has been the main focus of the relevant committees. However, discussions have also begun on reauthorizing the Higher Education Act (HEA), with a focus on affordability. Senator Lamar Alexander (R-Tenn.) has released white papers on topics such as institutional risk sharing in financial aid and providing consumers with better financial information about schools. He and Senator Patty Murray (D-Wash.), as the Senate’s education committee leaders, have also established working groups on HEA.
Other members of Congress have identified their own priorities for affordibility, including a bill calling for a report on innovative ways to lower costs and legislation that would provide grants to schools using programs that reduce student costs and program length.