Report: Low-Income Students Cannot Afford 95 Percent of Colleges

By Allie Bidwell, NASFAA Senior Reporter

College affordability is not a new issue for discussion among higher education stakeholders. But a new, first-of-its-kind analysis from the Institute for Higher Education Policy (IHEP) uses net price data from thousands of institutions to show just how unaffordable college is for most low- and middle-income students.

The analysis used Lumina Foundation’s Affordability Benchmark to develop a framework for affordability. Under this benchmark, the student or his or her family should save 10 percent of their discretionary income in the 10 years before college, and the student should be able to work 10 hours per week while attending college full-time. IHEP used that benchmark as a guide to measure affordability for 10 theoretical students from different backgrounds, and applied that information to net price data from 2,000 institutions. Applying that benchmark, the report said, “reveals just how unaffordable college is for low-income, working-class, and middle-class Americans.”

“Unfortunately, comparing the sample colleges’ net prices with the students’ respective affordability thresholds yielded sobering results,” a report on the analysis said.

Overall, most colleges were unaffordable for eight of the 10 theoretical students, and “most dramatically unaffordable” for the lowest-income students. Of the 2,000 colleges examined, nearly half (48 percent) were affordable to wealthy students from families with annual incomes above $160,000, the analysis found. More than one-third of the colleges were only affordable to students with a family income over $100,000. Students from lower income backgrounds, the analysis found, could only afford 1 to 5 percent of the colleges.

“The college affordability problem is fundamentally one of inequity,” the report said. “This inequity enables a wealthy student to attend essentially any college while effectively shutting out many of her peers.”

Among public schools, two-year and four-year institutions that missed students’ affordability threshold did so by, on average, $7,000 and $9,000, respectively. Among private institutions, nonprofit colleges missed the affordability threshold on average by $16,000, and for-profit colleges missed the mark on average by $18,000.

But even after taking into account federal student loans, at least 70 percent of the colleges were unaffordable for lower-income students, both independent and dependent.

The report makes several recommendations to help fix the problem, such as protecting and strengthening the Pell Grant program, strengthening direct investment in public colleges and need-based aid, managing institutional costs to concentrate expenditures on students, keeping prices low for needy students, and passing legislation that gives students the information they need to make affordable choices.

“Just as the college affordability problem is not attributable to any single factor, these interventions are not mutually exclusive—nor will they be effective as standalone options,” the report said. “Each recommendation should be considered an important part of a larger effort to consider our collective return on taxpayer and student investments in higher education, which includes improving quality assurance, emphasizing outcomes, and addressing college affordability for all Americans.”

On their own, certain recommendations do not do enough to completely address the problem. Doubling the maximum Pell Grant, for example, would significantly increase the percentage of affordable colleges (from 1 to 5 percent to 5 to 24 percent), but the majority would still be unaffordable. Reducing all net prices to $10,000 would make a significant impact in affordability, but still as many as half of the colleges would be unaffordable for low-income students.

“We have two paths before us,” the report said. “On the one hand, we can watch as our fellow Americans—who may not even have even [SIC] completed the education they paid so much for—continue to take on more debt, delay homeownership, and struggle to provide for their families. On the other hand, we have the opportunity to make investments together that will drive our economy, will improve healthcare costs and lower incarcerations rates, and will ultimately help our fellow citizens contribute fully to our way of life.”


Publication Date: 3/23/2017

Brad S | 3/24/2017 2:35:43 PM

Education was not always this high. As late as the 80's, students were able to cover all tuition in many cases with a minimum wage job during the Summer only. Times have changed but, in the case for higher education costs, not for the better. It has the sense of the housing bubble of 2008.

Chandra O | 3/24/2017 12:2:59 PM

I'm glad to see a report that focused on net price and college affordability. Loan counseling may help some borrow less, but many borrow because it's the only way they can pay their bill or housing and it is often still not enough.

Rick M | 3/24/2017 9:51:57 AM

There are a tremendous variety of resources to assist students pay for college. This includes FREE scholarships. One MAJOR challenge is the timing as well as the guidance that needs to be provided to the students. As everyone knows there is need based aid as well as merit based aid. Many Ivy League universities have private scholarships that pay 100% of the cost of attending. There are a tremendous number of students from ALL socioeconomic levels that can handle that level of academic rigor but do not apply because they are not being assisted on how to navigate the steps it takes to apply and their parents have not experienced postsecondary so they cannot help their son/daugther through the steps and are relying on the school. This is the reality. Pushing them into a vocational route is a poor response and a tremendous loss for the families and some of the brightest minds in our country.

Sara V | 3/24/2017 9:21:32 AM

Can you provide a direct link to the report and analysis from the Institute for Higher Education Policy?

James P | 3/24/2017 8:47:45 AM

While this is an interesting report, it doesn't go beyond that. Poverty will always exist, a college education will always be expensive, and as unfair as it is, not everyone will be able to go to all colleges. I think we should focus on what can realistically be done to provide quality educational opportunities to as many people as possible.

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