Study: College Affordability More Complicated Than Debt Load

By Allie Arcese, Director of Communications

By Allie Bidwell, NASFAA Senior Reporter

Increasing student loan debt is most commonly associated with a lack of college affordability. But in a new report published by the Manhattan Institute, researchers found that while borrowing increased across the board for students over a five-year period, college became slightly more affordable.

The report—written by Beth Akers of the Manhattan Institute, Kim Dancy of George Washington University, and Jason Delisle of the American Enterprise Institute—argues that college affordability is more complex than the amount of debt students owe upon graduating. Policymakers should also consider, they wrote, “the long-run value of a degree relative to its price.”

The authors used the latest data from the Department of Education’s (ED) National Postsecondary Student Aid Survey (NPSAS) for the 2015-16 academic year. They found that borrowing increased for students seeking a bachelor’s degree across all income quartiles by about $1,110 from 2011-12. The increase was the largest, however, for students from the highest income quartile, or those from families earning more than $120,000 per year. Borrowing for the wealthiest students increased by nearly $4,500, while those in the lowest income quartile increased their borrowing by just under $1,400. The borrowing gap between the highest and lowest income students grew from $7,500 in 2011-12 to $10,500 in 2015-16, suggesting wealthier students continue to attend more expensive institutions.

Still, college affordability is a term that means something different to different types of people. The authors of the Manhattan Institute report use Lumina Foundation’s Rule of Ten to assess affordability—it is “affordable” if it does not exceed what a student and family can save with 10 percent of their income in the 10 years before enrollment, and a student’s earnings working 10 hours per week while in college.

The authors found that college is still unaffordable for the vast majority of students: 83 percent of those seeking a bachelor’s degree, and 69 percent of those seeking an associate degree. By income quartile, college is unaffordable by this rule for 80 percent of those in the lowest quartile, 83 percent of those in the second-lowest quartile, 71 percent of those in the second-highest quartile, and 57 percent of those in the highest quartile.

Despite the widespread unaffordability of college, those numbers actually represent a positive shift from 2011-12, the authors found. In 2011-12, for example, college was unaffordable for 86 percent of those seeking a bachelor’s degree, and 75 percent of students overall, compared with 72 percent in 2015-16. Part of that shift may come from increased student earnings for most student populations.

This report, the authors wrote, “reveals a similar story to the one that emerged in our previous analysis of the 2011-12 NPSAS.”

“In 2015-16, students from the highest-income households continued to attend the highest-cost institutions and continued to borrow the most, too,” they wrote. “This is consistent with the hypothesis that students make choices about enrollment that optimize the long-run returns of their investment. It also highlights the need to consider the long-run returns—as well as short-term enrollment costs—of higher education when examining ‘affordability.’”


Publication Date: 1/10/2019

Roselyne D | 1/10/2019 9:45:37 AM

College debt has to do with the need for institutions to provide refunds to students which cover more than just books and college costs. If institutions and the Dept. of Education would look at the amount of refunds that students receive compared to what it costs instead of considering where the students spend the money, it would reduce the debt students incur.
Also, if the DOE would look at business owners who consistently have losses in their business and state that they receive no income, this would reduce the overall education spending for the country.

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