The Cost of College

Why higher education is still too expensive

On Nov. 8, 1965, President Lyndon Johnson signed into law the Higher Education Act. The legislation increased financial assistance for post-secondary education and, supporters claimed, opened the doors of college to those who had previously been denied access because of lack of means. As the president proclaimed in his speech upon signing the bill, “A high school senior anywhere can apply to any college… and not be turned away because his family is poor.”
Forty-five years later, however, colleges still find themselves struggling to make higher education affordable. To understand why affordability remains a significant issue, one needs to look under the surface, at the pressures that colleges are feeling. In particular, the competition caused by ubiquitous college ranking systems has led schools to adopt financial aid policies that are less than helpful to those most in need.

According to the New York Times, tuition at public colleges has increased an average of 8.8 percent a year since 1982, much faster than the rate of inflation. Richard Murnane, an economist at the Harvard Graduate School of Education, told the HPR that the explanation for this trend is an increasing pressure on colleges to spend. “Colleges compete for students by offering amenities, which drive up the cost of education,” Murnane said. He also blamed the increased cost of college on the effects of national rankings such as the one provided by U.S. News and World Report. According to Murnane, their efforts to attain high rankings force schools to spend heavily on the latest technology and on top research professors, whether or not such expenditures actually contribute to student learning.
At the same time, according to Michael McPherson, president of the Spencer Foundation, a private foundation that supports research in education, there has been a substantial “decline in state government subsidies to colleges.” McPherson told the HPR that the competition for funding between education and other programs, particularly health care and the penal system, has crowded out education subsidies. So universities have felt pressure on two fronts: they need to spend more, but at the same time they receive less from government. As a natural consequence, the price of tuition goes up and up.
New Business Strategy

In response to budget pressures, many universities have begun to substitute merit scholarships and tuition discounting strategies for need-based financial aid. The National Dialogue on Student Financial Aid, a 2003 panel sponsored by the College Board, reported that merit scholarships that do not take financial need into account increased from less than 10 percent of public scholarships in 1993 to 25 percent in 2003, and they have continued to grow in popularity.
Unfortunately, merit scholarships neither increase college affordability nor even improve an institution’s relative prestige. Derek Bok, former president of Harvard University, said, “Unfortunately no individual college can afford to give up the practice because if they do they lose all these students.” If universities could coordinate to stabilize their prices and expenditures, both they and their students could be better off.
The Decline of Aid

The shift in financial aid programs towards merit scholarships places less affluent students at a disadvantage. Jane Wellman, executive director of the Delta Project on Postsecondary Education Costs, Productivity, and Accountability, told the HPR that, as a result of these cost-saving measures, “more low-income students are shifting to lower-priced public and community colleges, which are running out of money and room to accommodate them.” The National Center for Education Statistics estimates that 80 percent of high-income students enroll in college right after high school, compared to only 50 percent of low-income students.
The declining effectiveness of financial aid may allow this gap to grow. And this gap has repercussions beyond college. There is a significant pay differential between college and high school graduates. “On average, college graduates were paid about 95 percent more than high school graduates for full-time work,” said McPherson. To make higher education more accessible, Wellman argued, “We need to stabilize funding for public institutions.”
The Road Ahead

The upward trend in college tuition rates is not necessarily a permanent condition. Yet policy can only go so far without the cooperation of the schools themselves. It is up to colleges to remember their commitment to the Higher Education Act and to improve the affordability and accessibility of higher education, even if that means a temporary bump down in the college rankings.
Ioana Calcev ’12 is a Staff Writer.