Financing Postsecondary Education: The Federal Role - October 1995
A famous essayist whose name escapes me once apologized to his friend for not having the time to write a shorter letter. The length of this paper exceeds the 5-10 pages suggested for the Charleston conference papers. Having been asked to present pertinent policy history, I ran short of time to make it shorter. Yet perhaps an extra allowance should be made for history on this occasion. After all, we are in part marking the 30th anniversary of the Higher Education Act (HEA) of 1965.
More to the point, an interpretation of the past may be the most useful place to start for those trying to shape better government policies aimed at helping students and families pay for higher education.
To guide readers, the first seven pages or so recount the evolution of the federal role in postsecondary student aid, highlighted by critical dates over the past 50 years. Depending on their familiarity with the history, readers may wish to make quick or selective reading of this material, then focus on the balance of the paper, which describes from this observer's vantage point the broad trends, shifts, achievements and shortfalls of the government's effort during this period.
As further background for the paper and the conference, Figures 1 and 2 and Table 1 and Table 2 show the growth and changes in the mix of student aid dollars, from federal as well as state and institutional sources, in recent decades. In purchasing power (constant dollars), the total amount of aid available to students has grown more than 15-fold since 1963-64, largely because of an expanding federal investment. Although institutions supplied almost half of all aid in the early 1960s, they provide less than one-fifth in the mid-1990s. The federal government now generates over $35 billion annually in student assistance, or three-fourths of the total, the bulk in the form of federally-sponsored loans to students and their parents.
It is in the past several decades, however, that equal opportunity has become a centerpiece of public policy toward higher education. A principal expression of this goal has been the growth of need-based student assistance. Today the federal government is by far the largest sponsor of such aid, but the establishment of this federal commitment did not come easily.
1944. The GI Bill was enacted by Congress to reward veterans who had served their country during wartime and to help them catch up with their peers whose lives had not been interrupted by military service. During the 1940s and 1950s, GI Bill benefits extended higher education opportunities to thousands of men and women who otherwise might never have gone to college.
But advocates of broader federal support for higher education unrelated to military service faced an uphill struggle. In fact, aid-to-education proposals of all kinds repeatedly ran aground in Congress, blocked by civil rights and church-state controversies and fear of federal control of education. Moreover, the idea of federal scholarship support, whether based on financial need or academic merit, met resistance from those who believed students should not get a free ride. Many members of Congress at that time had worked their way through college.
1958. The Soviet launch of Sputnik finally gave Congress the occasion to justify a limited form of student assistance in the name of national security. The National Defense Education Act of 1958 provided low-interest loans for college students, with debt cancellation for those who became teachers after graduation. The law also established graduate fellowships to encourage students in the sciences, mathematics, engineering, and other strategic fields. Outright scholarships or need-based grants for undergraduate study, however, were still considered beyond the pale.
1965. The Kennedy legacy, the civil rights movement, and the Johnson Administration's War on Poverty converged in the mid-1960s to break new ground. The 89th Congress presided over the broadest sweep of social legislation since the New Deal. Along with breakthroughs in civil rights came large-scale aid to education, including the HEA.
Title IV of the HEA embodied the first explicit federal commitment to equalizing college opportunities for needy students. This goal was to be advanced through need-tested grants and through student support programs such as Upward Bound (initially part of the war on poverty legislation of 1964) and Talent Search, designed to identify and foster access for college-able students who were poor. Colleges wishing to receive an allocation of funds under the new Educational Opportunity Grants program were required to make "vigorous" efforts to identify and recruit students with "exceptional financial need." Title IV of the law also included College Work-Study (another program first ushered in as part of the War on Poverty) to subsidize employment of needy students, and the Guaranteed Student Loan (GSL) program to ease the cash-flow problems of middle-income college students and their families.
The impetus for the GSL program was mounting support in Congress for a tuition tax credit for parents with children in college. Advocates of greater access for needy students worried that enactment of a tax credit and the resulting loss of federal revenue would hurt chances of funding new programs for low-income students under the HEA. The loan program appeared to be a much less costly way to help the middle class, especially since it relied on private sources of loan capital. At least initially, it was not anticipated to draw heavily from the Federal Treasury, so that federal resources could be focused primarily on the neediest students.
1968. Congress reauthorized the HEA three years later with only slight modifications. A new program, Special Services for the Disadvantaged, was added to the law; in combination with Upward Bound and Talent Search, they came to be known as the TRIO programs.
Although the ballooning costs of the Vietnam conflict constrained the growth of many domestic social programs, appropriations for student aid grew rapidly in the late 1960s. These monies eclipsed other forms of federal support for higher education, such as construction of academic facilities.
1972. The next reauthorization of the HEA rounded out the principal programs and the basic charter of today's federal student aid system.
During the debate leading up to this legislation, the higher education community urged Congress to enact formula-based, enrollment-driven federal aid to institutions. But legislators decided that funding aid to students was the more efficient and effective way to remove financial barriers for needy students and thus equalize opportunities for higher education. Congress also viewed student aid as a way to harness market forces for enhancing the quality of higher education. Students, voting with their feet, would take their federal aid to institutions that met their needs; less satisfactory institutions would wither.
Congress made a further point in the 1972 legislation by substituting the term "postsecondary education" for "higher education" and broadening the range of options available to students. The intent was to break the stereotype that education beyond high school meant full-time attendance in a four-year academic program leading to a baccalaureate degree. The 1972 HEA amendments extended greater federal recognition and support to career and vocational education, community colleges, and trade schools as well as to students in part-time programs.
Above all, proprietary schools gained full eligibility to participate in the programs under Title IV of the HEA. Over the next two decades, these schools would proliferate and prove uniquely adept at capturing federal student aid dollars.
Congress also expanded the types of assistance available to students. The Nixon Administration had proposed Basic Educational Opportunity Grants to replace three existing federal student aid programs administered through the colleges: Educational Opportunity Grants, National Defense Student Loans, and Work-Study. Congress refused to repeal the campus-based programs, but did adopt Basic Grants (now called Pell Grants) envisioning this new program as a foundation for all forms of aid and one that students would apply for directly to the federal government. Initially authorized at a maximum of $1,400, the Basic Grant was to provide a minimum level of resources to help assure access to higher education; the campus-based programs would provide supplemental aid to help assure student choice among programs and institutions.
State Student Incentive Grants were also authorized in 1972. The SSIG program provided federal matching dollars to induce states to enact or expand their own need-based student grant programs. And the 1972 law established the Student Loan Marketing Association (Sallie Mae) as a publicly chartered private corporation to increase liquidity and capital availability in the GSL program.
1976. Issues of quality control surfaced in the next HEA reauthorization debate; Congress may have had second thoughts about some of the educational options that had been legitimized in 1972. But Congress was more concerned about getting banks to lend money for postsecondary education. The 1976 amendments provided federal incentives for states to establish loan guarantee agencies.
Another significant expansion of the aid system was authorized with the addition of a few words to the statute. Students without high school degrees became eligible for federal assistance so long as they had the "ability to benefit" from postsecondary training.
1978. In an off-year of the reauthorization cycle, but under pressure for some kind of response to the perceived middle-income squeeze in financing college costs, Congress passed the Middle Income Student Assistance Act (MISAA) of 1978. As in 1965, tuition tax credit proposals had built up another head of steam in Congress. To head them off, congressional Democrats and the Carter Administration developed a counterproposal to widen eligibility for Pell Grants and open subsidized guaranteed loans to any student regardless of income or financial need.
1979. A year later Congress passed a little-noticed amendment assuring banks a favorable rate of return on guaranteed student loans by tying their subsidies directly and fully to changes in Treasury bill rates. (Previously the rate had been set by a group of government officials with a cap on how much lenders could receive.) With the economy moving into a period of double-digit inflation and interest rates, student loan volume and associated federal costs exploded. The problem of lender participation and capital shortage in the loan program became a thing of the past.
1980. The pressure to expand financial aid for the middle class continued through the HEA reauthorization of 1980. Outmaneuvering the Carter Administration as well as the congressional budget committees, the education authorizing committees further liberalized criteria governing need-tested aid, yet shielded the open-ended GSL from measures to curb eligibility, reduce subsidies, or otherwise control ballooning federal costs. The 1980 legislation also created offshoots of the GSL program providing supplemental borrowing opportunities for parents of dependent undergraduate students and for students who were financially independent of their parents.
1981. However, the legislative expansion of 1980 was short-lived. Ronald Reagan was elected president, and domestic social programs faced a budgetary onslaught in the early 1980s. Many provisions of the 1980 reauthorization were repealed in the 1981 budget reconciliation, need was reintroduced as a condition of eligibility for guaranteed loans, and an origination fee of 5 percent was imposed on borrowers as a cost-cutting measure.
The growth curve in federal student aid leveled off sharply in the first half of the 1980s. Grant support dropped, as did the overall purchasing power of student aid. Loan eligibility and subsidies were trimmed; but as an entitlement that had become popular with the middle class, guaranteed student loans proved the most resilient form of aid. Loan volume continued to grow, although at rates slower than between 1978 and 1981.
1986. In the mid-1980s, in the face of continued Reagan Administration threats to the programs, congressional advocates of student aid adopted a damage control strategy. A reauthorization that was basically status quo was the result. Legislators voiced concern about the increasing reliance of students on loans, but they came up with no effective remedies to combat this trend as tuition at both public and private institutions spiraled well ahead of inflation. Federal borrowing ceilings were increased.
1987-90. Loan volume shot up again after the 1986 HEA reauthorization. Meanwhile, media attention and public concern focused on mounting student loan defaults and proprietary trade school abuse. Through the annual budget reconciliation process, Congress forced a series of changes aimed at reducing defaults and effecting other cost savings.
1992. Leaders of the reauthorization process in Congress again said they wanted to achieve a better balance between grant and loan support for students, boosting grant aid and reducing reliance on loans. But the 1992 legislative outcome continued the policy drift in the opposite direction.
The prospect of a post-cold war peace dividend had fueled hopes that Pell Grants might be turned into an entitlement or mandated spending program with automatic annual increases for inflation. But the peace dividend never materialized, leaving no room under the budget rules for such an expansion.
After the attempt to create a Pell Grant entitlement failed, Congress followed the path of less resistance by boosting dollar ceilings for the loan programs. In addition to raising the borrowing limits for students, Congress uncapped the Parent Loan (PLUS) program, thus allowing parents to borrow up to the total cost of attendance minus any other funds the student might have received. In estimating the federal costs of all the new borrowing authority, House and Senate sponsors assumed that low market-interest rates would continue, thus minimizing the projected expense of the changes and avoiding any violation of spending caps mandated in the budget process.
The 1992 legislation also created a new, unsubsidized loan option not restricted by financial need. This was designed to make loans available to those Americans in the middle-income range who had been squeezed out of eligibility for the subsidized guaranteed loan. ("Unsubsidized" means that the government does not pay interest costs while the borrower is in school.)
This legislation further established a consolidated federal methodology for determining student and family ability to pay that applies to all Title IV programs, not just Pell Grants. The net impact of the new methodology (which many states and institutions also use as the basis for awarding their own funds) is a dramatic reduction in expected family and student contributions, extending potential eligibility for aid (particularly loans) to a substantially larger portion of the middle class.
Like the responses to the 1978 and 1986 legislation, student loan volume has once again ballooned as a result of the 1992 reauthorization. Increased loan limits, introduction of unsubsidized loans, and changes in need analysis boosted student and parent borrowing by almost $10 billion between academic years 1992-93 and 1994-95--nearly a two-thirds increase in just two years. (See Table l.)
The 1992 legislation also authorized a demonstration program to test the feasibility and cost effectiveness of the federal government administering student loans directly through postsecondary institutions as an alternative to guaranteeing loans through private banks. Finally, Congress in 1992 sought to tighten oversight of institutions participating in federal aid programs by redefining the responsibilities of the gatekeeping triad--the Department of Education, postsecondary accreditation bodies, and the states. The principal new thrust placed more reliance on states through the creation of State Postsecondary Review Entities (SPREs) to help determine institutional eligibility under Title IV.
1993. Even as Congress hammered out the 1992 legislation, presidential candidate Bill Clinton was on the campaign trail promising a complete overhaul of the student aid system if he was elected. He repeatedly cited defaults, excessive bank fees, high government costs of the loan program, and the aid system's overall lack of effectiveness in making college affordable. Emphasizing the responsibilities of those who receive aid, Clinton called for benefits that students could earn through community service or reimburse at rates geared to their future income.
A year later, in fact, President Clinton won Congressional passage of the Student Loan Reform Act of 1993, altering the way student loans are financed, originated, serviced, and repaid. The 1993 legislation greatly expanded on the Direct Loan demonstration program authorized in 1992, calling for at least 60 percent conversion of federal student loan volume from guaranteed to direct lending over a five-year period. The act also called for more flexibility in how borrowers repay including an income-contingent plan that calibrates monthly repayments to a percentage of the borrower's income for up to 25 years.
In his first year in office, the President also won passage of a national and community service program, though on a much smaller scale and with much less of a link to the student aid system than he had called for during the campaign. As enacted and funded, the National Service Corps provides benefits to only a tiny percentage of federal student aid recipients.
1994. Having made student aid reform a top domestic policy commitment, and having won early legislative victories to support plans in this area, the Clinton Administration struggled to fulfill another campaign promise--to streamline the regulatory process for student aid programs. Yet to implement the host of legislative initiatives passed in both 1992 and 1993--everything from SPREs to direct lending and income-contingent repayment--the Department of Education ultimately generated more than 70 rule-making packages. The volume and complexity of the new rules as well as contention with the education community over many of them led to a sense that the regulatory process was as overwhelming as ever.
At the same time, the Clinton Administration sought to project a longer-range, Phase II agenda of student aid reform. The Department of Education held regional hearings around the country to test reactions and gather ideas on how federal aid might be further restructured, better targeted, and simplified. However, the Administration's Phase II vision sparked little enthusiasm among aid administrators coping with the broad scale of change already under way, or with college leaders preoccupied with the Administration's SPRE proposals. The Administration's Phase II designs were also overtaken by political events, namely the 1994 election.
1995. With new Republican majorities in both Houses of Congress, the policy environment in Washington is as unsettled as it has been since the early 1980s. The federal commitment to education and other domestic social programs once again hangs in the balance. The outcome of today's hectic debates in Washington is anyone's guess. The only certainty is that almost everything government does--and how it should be done--is on the table.
What has changed since the principal federal aid programs of today were first legislated? In one sense, not a great deal. The student-based strategy Congress adopted in the 1960s and 1970s--granting and lending to students rather than institutions--has become the system's hallmark. Today more than 90 percent of U.S. Department of Education funds for postsecondary education are provided in the form of student financial aid. With additions and elaborations, in fact, the same programs are in place as were established a quarter century ago.
Underlying policies, however, have shifted. On many counts, today's aid system looks much different from what the early legislative framers envisioned.
Growing Reliance on Loans. Above all, the drift toward a system that relies primarily on student debt to finance higher tuition has turned the original commitment to equal opportunity on its head. The legislation of the 1960s and early 1970s established a commitment to help disadvantaged students through need-based grant programs, while helping middle-class families through government-guaranteed (but minimally subsidized) private bank loans.
Today, loans are far and away the largest source of aid, even for the lowest-income students. Since the mid-1970s, when student borrowing began to grow, loans have increased from about one-fifth to nearly two-fifths of all available student aid. Federal student loans provided over $26 billion in 1994-95, almost five times the size of the Pell Grant program that was meant to be the system's foundation. (See Table 1.)
The Clinton student loan reforms over the long haul could help redress the loan-grant imbalance. Part of the intent of direct lending from its conception has been lower federal costs compared with the elaborate subsidy structure of the guaranteed loan program. At the moment, the shift to direct lending--and the projected cost savings--are being challenged by the Republican Congress. To the extent that the direct lending program does survive and savings do result, more federal resources could become available for investment in Pell and other grant aid. On the other hand, direct lending could lead to more borrowing; to the extent that it succeeds in streamlining delivery of loans, it may make loan capital that much more accessible and attractive.1
Erosion of Need-Based Standards. Meanwhile, the antipoverty origins of the 1960s legislation have faded into history as eligibility for federal student aid has been stretched up the economic ladder. This development has been double-edged. On the one hand, broader eligibility has popularized programs with the middle class and, therefore, strengthened their political base. The stronger political foundation resulting from the middle-income legislation of 1978 probably helped to protect these programs from what could have been worse cutbacks in the early 1980s. On the other hand, the shift has diluted the federal emphasis on subsidies for low-income students and led to the predominance of loans in the mix of available aid.
The changes in need analysis enacted in 1992 have produced another expansion in middle-income eligibility, inflating officially recognized need by several billion dollars. But with no corresponding increase in available funds, more "need" is chasing roughly the same number of available dollars. The probable effect is that scarce dollars have shifted up the income scale, at the expense of more disadvantaged students and families.
Growth in Self-Supporting, Non-Traditional Students. In the past several HEA reauthorizations, Congress has also sought to adjust aid policies to better meet the needs of older and part-time students. The original programs and procedures of need analysis were designed for families with dependent children who attend college full time. However, growing numbers of students are beyond the traditional age group, attend less than full time, and have ongoing family and work responsibilities while in school. Over the past two decades, the proportion of postsecondary students over age 25 has roughly doubled, from one-fifth to two-fifths of all students. Students qualifying as independent or self-supporting under federal rules now constitute a substantial majority of Title IV aid recipients.
How the government should support such students has become an ongoing policy concern in the 1990s. In 1992, Congress liberalized eligibility for some categories of independent and part-time students, but restricted it for single independent students. Policy makers remain concerned that the aid system is insufficiently sensitive to the wide-ranging circumstances of an increasingly diverse postsecondary population. At the same time, trade-offs are involved; outside of entitlement programs, expanding eligibility for independent adult students potentially reduces the dollars available to dependent students from low-income families.
Use of Aid for Short-Term Vocational Training. When Congress decided to "broaden the mainstream" of postsecondary education in the early 1970s, no one had envisioned the burgeoning of the proprietary trade school industry. The proprietary sector has been highly responsive to federal student aid policies.2 It flourished in response to the postwar GI Bill, and once fully eligible for programs under Title IV of the Higher Education Act, the industry again expanded rapidly in the late 1970s and 1980s. Entrepreneurs created hundreds of new for-profit schools and programs during this period, all enrolling aid-eligible students, many of them focusing on low-income inner-city areas. Alongside training traditionally offered by the proprietary sector in secretarial work and business, refrigeration, welding, auto mechanics, and the like, new programs sprouted offering training for truck drivers, security guards, retail clerks, and nannies.
By the late 1980s proprietary school students received one-fourth of all Pell Grant funds and more than one-third of guaranteed loan volume. Program abuse and disproportionately high loan default rates in the trade school sector, however, attracted mounting publicity, prompting a series of legislative and regulatory remedies The proprietary school industry and its share of federal student aid funds have since contracted significantly. Proprietary schools nonetheless continue to have a major stake in federal aid. Of roughly 7,500 institutions now eligible for the Title IV programs, about 4,000 are proprietary. Students at these institutions currently receive one-sixth of Pell Grants and one-tenth of all guaranteed loans.
Compared to 25 years ago, when perhaps 2,000 collegiate institutions participated in federal student aid programs, today's regulatory dilemma for the Department of Education is the sheer number and diversity of schools and the kinds of education and training supported by Title IV. A focus on short-term vocational training fits with the national agenda of retraining and upgrading the skills of the work force. But student aid is not necessarily the most effective mechanism for financing such training. There is also virtually no coordination of Title IV aid with the substantial amount of support for postsecondary employment training provided by other federal programs and agencies.3
Use of Aid for Remediation. Over time, more and more federal student aid dollars have been provided to students who are not prepared to do college-level work. This trend toward funding remediation has occurred for two reasons. First is the "ability to benefit" provision added to the law in 1976, which allowed hundreds of thousands of non-high school graduates to qualify for Title IV aid. The standards used to determine which students can benefit have been low and largely unregulated. For a long time, the tests were developed and administered by the schools to which the students were applying. More recently, a variety of federally-sanctioned independent tests have been in use. However, the "passing grade" has been low enough to allow all but a handful of students to qualify for aid on this basis.
The second reason for the trend toward Title IV funding of remediation is simply the inadequate preparation of large numbers of high school graduates. The ongoing debate over K-12 school reform and standards underscores the fact that too many high school graduates cannot yet do college-level work. In recognition of this underpreparedness, the existing federal student aid legislation allows students taking remedial courses to receive federal aid for up to one year of course work. But the regulations governing this limitation are unclear as to how eligibility is to be terminated, and many students taking remedial work continue to receive aid for periods longer than one year.
Federal student aid has clearly been an important force in shaping American postsecondary education since World War II. Although causes and effects are arguable, federal aid has no doubt helped fuel a half century of explosive growth in college attendance by Americans, and it surely has had something to do with producing the diversity of today's student population.
Yet one casualty of time has been naive expectations about what could be accomplished through student aid to advance national goals of educational equity, quality, and affordability. The balance of this paper discusses these goals and presents indicators relating to the effectiveness of student aid in fostering them.4
Access. Above all, the problem of unequal opportunity has proved more intractable than anyone anticipated in the early years of the Higher Education Act. In the late 1960s and early 1970s, widely-cited reports from the Bureau of the Census showed that a college-age youth from a family with an income over $15,000 was nearly five times more likely to be enrolled in higher education than one from a family with an income of less than $3,000.5 The new student aid programs were to be on the cutting edge of policy to close such gaps.
Today college-age young people from the highest-income range by Census categories ($75,000 or more) are three and a half times more likely to be enrolled in college as those from the lowest income range (under $15,000).6 Although shifts in the distribution of income probably invalidate a precise comparison of Census data over the intervening decades, these figures may suggest a measure of improvement in access to college opportunities during this period. But the more certain point is that large gaps stubbornly persist.
Many other statistics underscore the continued socioeconomic disparities in access to and successful completion of higher education programs. Among recent high school graduates, those from low-income families are still half as likely to enroll in college by the fall following their graduation as those from high-income families. The enrollment rate of recent black high school graduates (47 percent in 1991) still lags behind that of whites (64 percent); the rate in 1991 for Hispanic high school graduates was 53 percent.7 In 1993, whites 25 to 29 years of age were still twice as likely to have completed four years of college as blacks, and three times more likely than Hispanics.8
Such gaps in opportunity, and the failure of student aid policies to close them, should probably not come as a surprise. For one thing, federal student aid in its conception was primarily about helping those who otherwise might not have access to higher education; in their evolution, federal policies have become as much (or more) about relieving the economic burden for those who would probably pursue postsecondary programs without such aid. Moreover, it is clear that state tuition, subsidy, and funding policies are at least as important in determining patterns of enrollment and access as what the federal government can achieve through its investment in student aid.
We also know more today about the complexity of the college-going process. Enrollment and success in higher education are functions of many factors--academic aptitude and prior schooling, family and community attitudes, motivation, and awareness of opportunities--not just ability to pay. Above all, there appear to be huge and growing disparities in the capacity of K-12 educational systems to prepare young people for the world beyond high school. Higher education, much less student aid as a financing strategy, cannot alone redress social deficits and imbalances that appear to threaten our country's future.
Access to What? The notion that having students vote with their feet would somehow assure quality in the postsecondary education marketplace was a dubious proposition from the start. More than a quarter century later, it is clear that the marketplace rationale begged important questions of institutional quality and accountability, as well as consumer information, awareness, and protection.
Federal student aid programs have been plagued by institutions that defraud both taxpayers and students, offering programs of little or no educational or vocational value, or that are so poorly managed they do not serve students effectively. High student loan default rates, as well as low completion and placement rates for students who receive aid, have reflected these problems and galvanized public concern.
Much of the trouble has come in the for-profit sector; but the baggage of fraud and abuse has encumbered the entire student aid effort and triggered tighter rules affecting all of postsecondary education. In part, this reflects successful lobbying by the proprietary school industry, which has blocked proposals to remove trade schools from participating in Title IV programs or authorize separate regulatory controls over them. It also suggests that policy makers are not necessarily persuaded that all problems relating to consumer protection and lax educational standards are in the non-collegiate sector. Policy makers are increasingly prone to examine more critically the effectiveness and performance of traditional higher education.
From the beginning, federal student aid policy has been shaped by a commitment to access. The legacy of access to higher education is deeply ingrained in our public values. Debates over student aid policy have typically centered on whether policy changes would hinder or expand access for disadvantaged students. But we have learned that access does not assure quality; in fact, access can ill-serve students if they do not complete their education or graduate without the skills they need to succeed.
Low-income, at-risk students are actually the most ill-served when student aid incentives encourage their enrollment in programs subject to minimal quality control. In such programs they have, at best, only modest chances of success; at worst, they are left with no job, a defaulted loan, and a bad credit record.
Affordability. In the 1970s, family income levels increased faster than tuition; growth in student aid outstripped both tuition increases and growth in the number of eligible students; and grant aid was more common than borrowing.
All these trend lines, however, turned against college affordability in the 1980s and 1990s. Family income has generally remained flat and has been far outpaced by tuition increases, which at both public and private four-year institutions have averaged at least twice the rate of inflation since 1980. Tuitions have risen annually by more than 8 percent over this period, while annual growth in the Consumer Price Index has averaged about 4 percent. Public sector prices have increased most sharply in the 1990s, rising at 3 times the rate of inflation as the economy and revenues in most states have declined.
Student aid, meanwhile, has failed to close the gap between family income and college prices. The real value of total aid available to students has increased since 1980. However, the growth has been primarily in the form of loans and has not kept pace with growth in tuition levels or in the eligible student population.
In the mid-1990s, tuition increases have moderated slightly. According to the College Board's annual survey of colleges, tuition in both public and private four-year higher education institutions has risen 6 percent in each of the past two years, still twice the Consumer Price Index but less than the rate of tuition growth in the early 1990s. More and more private institutions worry about pricing themselves out of the market and are trying to restructure their operations to contain costs. In the public sector, economic recovery may have relieved some of the pressure on tuition as a revenue source in state budgets. But the tuition spiral is not likely to end, nor is student aid likely to catch up, any time soon.
To say that federal aid programs have fallen short of expectations for achieving broad national goals is surely not to pronounce the effort an abject failure or to encourage those who would decimate the federal commitment in this area. It is, rather, to say that we sorely need constructive debate and proposals to strengthen the system that we have.
The foregoing review of history sets the stage tor asking questions essential to any attempt to envision better aid policies in the future. We need to revisit first principles. Does the case for federal investment in higher education remain as valid today as it was in the 1960s and 1970s? Are the goals discussed in this paper--access, quality, affordability--the right ones? If so, how should we define and operationalize them? Can we stem the policy drift toward a system that places more and more of the cost burden on students and their families? Should we? For all students? Some students? Which students? Do we need to strike a better balance between the values of equity and quality? If so, how? Do we have the right set of programs in place to get the job done? How can we reduce the system's complexity from the point of view of students, parents, and administrators?
These questions are just for starters. Other commissioned papers will provoke discussion in Charleston by presenting not only questions but blueprints for the future. To the extent that such discussion ultimately helps to sharpen policy and make the system more coherent and effective, the federal aid programs will be in a stronger position to compete for scarce resources, contribute to the country's economic future, and sustain the American promise of opportunity into the 21st century.
Lawrence E. Gladieux is executive director for policy analysis of the College Board, a national association of schools and colleges that provides testing, financial aid, guidance, training, and other services to the education community. He has built the reputation of the Board's Washington, DC, office for reliable analysis of trends and issues in higher education finance, student aid, education reform, and college admissions. He is editor of Radical Reform or Incremental Change? Student Loan Policy Alternatives for the 1990s (The College Board, 1989) and co-author of Congress and the Colleges: The National Politics of Higher Education (Lexington Books, 1976).
3 See Janet S. Hansen, Editor, Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy, National Academy Press, 1994.
4 For a more extensive discussion of indicators relating to the effectiveness of student aid, see Lawrence E. Gladieux and Arthur M. Hauptman, The College Aid Quandary: Access, Quality, and the Federal Role, The Brookings Institution and The College Board, forthcoming 1995.
5 For example, see Toward Equal Oppurtunity for Higher Education, Report of the Panel on Financing Low Income and Minority Students in Higher Education, College Entrance Examination Board, New York, 1973, p.11.
6 U.S. Department of Commerce, Bureau of the Census, School Enrollment--Social and Economic Characteristics of Students: October 1993, Current Population Reports P20-479, Table 16 "Families by Full-Time College Enrollment of Dependent Members 18 to 24 Years Old, by Family Income, Race, and Hispanic Origin: October 1993."
7 U.S. Department of Education, National Center for Education Statistics, The Condition of Education 1994, p.40.
8 U.S. Department of Commerce, Bureau of the Census, Educational Attainment in The United States: March 1993 and 1992, Current Population Reports P20-476, Table 18 "Percent of Persons 25 years Old and Over Who Have Completed High School or College, by Race, Hispanic Origin and Sex: Selected Years 1940 to 1993."