In a study published last year in the Quarterly Journal of Economics, researchers from Stanford, Harvard, the University of Toronto and the National Bureau of Economic Research looked at the college-enrollment decisions of 26,000 families in Ohio and North Carolina. The families all had incomes under $45,000. When some of those students and parents were asked to guess what annual tuition was at a local two-year public college ($3,099 at the time), they overestimated by an average of 300 percent.
As part of the study, tax advisers at H&R Block, who were already doing the families’ taxes, explained the true costs of college to some participants and filled out financial-aid forms for them — a cheap, easy intervention. Among the high school seniors who had the forms completed for them, enrollment in college the next year was 42 percent, eight percentage points higher than for a control group.
That was a random sample of low-income students. But studies also show that a lack of information about costs specifically hurts high-achieving low-income students, who don’t understand that elite and expensive schools can offer them the most aid.
Lemondre Watson, a senior at William & Mary, recalls thinking, as a high school student in Lynchburg, that the tuition figures he was hearing were surreal: “I don’t know where that money is coming from!” he said to himself. At the time, Watson’s mother did manual labor at a pipe-fitting plant, and his father was a retired bus driver. William & Mary costs $25,938 annually for in-state students, including room and board.
But at the urging of his teachers at Heritage High School, he applied: “They were pushing me to apply to more ‘reach’ schools. My grades were good, and I was involved in a lot of things, but I told people even if I got into William & Mary, I wouldn’t go.”
When he did get in, he was startled to realize that, because his parents earned less than $40,000, he qualified for a full ride. That made the highly selective college considerably cheaper than the school he’d been focused on, James Madison University, which he says would have cost $2,000 a semester. (U-Va. has a similarly generous program for very-low-income students.)
Now, as he weighs job offers, he’s also thinking about becoming a college consultant. “I’d like to be a witness to kids who are going through the same thing — considering college but thinking they can’t afford it.”
Research affirms that many high-achieving low-income students don’t apply to the selective colleges that have the most generous aid programs. Avery and Turner call it “market failure,” which sends such students instead to more expensive, less prestigious colleges that also have higher dropout rates.
Yes, students should think about college debt. They should think about their majors and look at for-profit colleges with an especially wary eye. But parents and counselors should also tell students that, on balance, there are few better reasons to take out a loan — even a loan that seems very large to an 18-year-old. The payoff is just that big.
More than a debt crisis, what poor students contemplating college face today is an information crisis. All those tales of baristas with $120,000 in outstanding loans only make the problem worse.
Read more from Outlook:
Five myths about student loans
I went to some of D.C.’s better schools. I was still unprepared for college.
Friend us on Facebook and follow us on Twitter.