But today, Johnson’s vision of the Higher Education Act as a great equalizer in the American economy is at risk. Indeed, the divide between the haves and have-nots in higher education is almost as great today as it was in the mid-1960s. In the past decade alone, the percentage of students from families at the highest income levels who received a bachelor’s degree has grown to 82 percent, while for those at the bottom it has fallen to just 8 percent.
Who is to blame for this growing divide? In large part, the same generation that mostly benefited from the original ideal of the law: the Baby Boomers.
When that generation went to college in the 1960s and 1970s, many of them paid little in tuition at nearly-free public institutions or received generous federal and state grants that paid for most of their bachelor’s degree. But during the past two decades, as members of that same generation came to power — in Washington, in state legislatures, or as college presidents and trustees — they presided over the decay of the basic building blocks of the Higher Education Act as they drastically increased tuition and pulled back on financial aid.
In a column last week about how Baby Boomers are to blame for much of what’s wrong with the American economy, The Washington Post’s Jim Tankersley mentioned how college costs have more than doubled since the early 1980s. But Tankersley’s list of grievances with the Baby Boomers didn’t go far enough when it comes to higher education. A college degree has become much less affordable for families in recent years largely because public officials and college leaders have abandoned three basic elements of the original Higher Education Act:
1. States are getting out of the business of higher education.
The Higher Education Act was never designed to supplant the investment states made in higher education. That investment came through either low tuition at public colleges or a so-called “high tuition, high aid” philosophy, where public institutions charged high rates for everyone and redirected dollars to the neediest students.
But in the past two decades, states have slashed higher education appropriations during each downturn in the economy and never fully restored the money when good times returned. This retreat hastened after the financial collapse in late 2008. Since then, nearly every major public university has started to look more like a private institution. Today in nearly half the states, students and their families pay for most of their college education.
Across the country, 29 states gave less to colleges in 2014 than they did in 2007, in part because lawmakers know that schools can raise tuition to increase revenue. Higher education remains the largest single chunk of discretionary spending in state budgets, and in recent years that share has been shrinking as colleges are last in line for state funds.
2. Financial aid is now an enrollment tool, not a public policy to help people afford college.
When the Higher Education Act was signed into law, financial aid was seen as a way to help needy students pay for college. Today, many colleges view financial aid dollars as a recruitment tool for smart students. In the mid 1990s, less than a quarter of freshmen at private colleges received so-called “merit aid.” Within a decade, that number had risen to nearly half the class as colleges competed for students by offering them scholarships regardless of need.
Now, even public colleges are using limited aid dollars to provide merit scholarships to students who lack financial need. According to a recent New America report, about one in five public colleges provide merit aid to at least 20 percent of their freshman class without financial need.
As more financial aid dollars go to merit aid, there are fewer available for low-income students who often can’t fill the gap between what they receive in aid and the actual tuition bill. As a result, many of them end up at less-expensive colleges where they are less likely to graduate or they forgo a higher education altogether.
3. Student aid increasingly means loans, not grants.
In 1980, more than half of financial-aid dollars were in the form of grants (meaning they didn’t need to be paid back). Today, grants make up only about 30 percent of federal dollars. What’s more, the buying power of the federal Pell Grant is near its lowest level in history. The maximum Pell Grant today covers only 61 percent of tuition and fees at the average public college.
In the 1980s, as tuition rose year after year at a rate that exceeded inflation, the top education official in the Reagan administration began to wonder if the federal government was indirectly causing higher tuition prices by providing a boost in federal aid each year. William J. Bennett, the secretary of education, touched off a firestorm of debate when he suggested that “increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions.”
His reasoning was that if families didn’t have access to financial aid, they would refuse to pay higher prices, in the same way consumers can control prices in other markets. The theory, known as the Bennett hypothesis, has been tested by dozens of researchers over the past 25 years with conflicting results.
This much is clear: Despite the strict limits Congress put on the amount students can borrow from the federal government, the overall amount of money loaned to students and their families to pay for college has more than doubled since 2000. In fact, the idea of student-loan debt is a relatively recent phenomenon. In 1989, just 17 percent of 20-somethings had student debt; today, 42 percent do.
Perhaps it is those graduates who had to pay a greater share of their college education who remain our best hope to renew the basic ideals of the Higher Education Act. In the near future, they will take on leadership positions in the government and on college campuses and hopefully begin to reverse the trends in student aid of the past few decades.