“It’s not a yes or no question: Is college affordable? The amount you can and should pay depends on what it is you’re paying for and what you’re getting for that investment,” said Sandy Baum, a senior fellow at the Urban Institute who worked on the project. “It makes sense to pay more for a bachelor’s degree than it does for a short-term certificate because it’s going to get you farther.”
The project offers a touchstone for high school students or adult learners wrestling with higher education choices because it delves into the complexities of the sector. There is no monolithic college experience or archetypal college student. Higher education is made up of public, private, two- and four-year schools, with varying amounts of financial resources to educate diverse student populations.
Colleges use a mix of appropriations, endowment funds and other revenue to subsidize the cost of education for all students. Still, those subsidies have dwindled at many schools, leaving tuition revenue to cover more of the expense. A recent analysis by the Federal Reserve Bank of Cleveland found that tuition revenue per student at public four-year universities rose by $5,700 between 1987 and 2013, to $9,300. At private colleges, it climbed about $12,000 to almost $20,000 per student.
For students, tuition is only one part of the calculation, as food, housing, books and supplies eat up a hefty portion of their budgets, even at low-cost community colleges. It is no longer feasible for students to work their way through college to pay the bills, according to the project. Working 10 hours a week for minimum wage during the school year and 35 hours a week over summer break was enough to pay tuition, room and board at the average public college in the 1960s and 1970s. Today, the same amount of work covers only one-third of the cost of the average public four-year university because of the increase in prices and decrease in the minimum wage in real terms.
There are also wide disparities in how students cover expenses. A low-income student attending a public four-year college in-state pays the bills with a 2 percent contribution from family, 22 percent from grants, 47 percent from loans and 29 percent from personal earnings, according to the project. A wealthy student at the same school pays for it with an 81 percent family contribution, 6 percent from aid and 13 percent from student loans.
“Even if your parents have all of the money in the world, doing something that you’re not likely to finish or that’s not likely to lead to a satisfactory outcome is not affordable because it’s not worth the money,” Baum said. “It’s not just where you come from, it’s where you end up that’s going to determine the value of what you pay for college.”
Although the long-term value of college is central to the question of affordability, research from the Institute for Higher Education Policy (IHEP) posits that the upfront costs remain insurmountable for many students. The nonprofit compared the net price — the cost after taking grants, scholarships and tax credits into account — of more than 2,000 colleges and found that the vast majority were out of reach for low- and middle-income families.
IHEP measured affordability by using the Lumina Foundation’s “Rule of 10” benchmark, which says families should be able to pay for college with 10 percent of their discretionary income saved over 10 years, with students working 10 hours a week in school. Based on that framework, students from households earning more than $160,000 a year can afford about 90 percent of the schools reviewed, while those from households earning less than $69,000 could barely afford to attend 1 percent to 5 percent, the report said.
“Outcomes matter … but we need policymakers to invest in policies that can help address the affordability challenge on the front end,” said Mamie Voight, a co-author of the report and vice president of policy research at IHEP.
She said doubling the maximum Pell Grant, which is now $5,815, would increase the number of affordable colleges for students with the fewest options. The report also calls on colleges to concentrate more of their endowment funds and other revenue on keeping costs down for students.
Voight said there is no disputing the value of higher education, especially in an economy where people with college degrees earn more than those with only a high school diploma. But asking students with limited resources to finance their degrees with large amounts of debt is “stifling the social mobility that higher education can offer.”