The Past and Future of Higher Education Finance
August 24, 2012
The idea that Americans should pursue a post-secondary education has been etched into the national consciousness. Over time, the federal government tried to shoulder the load of paying for college by providing loans and grants to help students achieve their dream of getting a college degree, says Chad Miller of the American Action Forum.
However, federal spending in the form of loans and grants doesn't seem to be accomplishing the goal of making college more attainable or affordable for students. More troubling is that financial aid is distributed to students that don't really need it, specifically in the context of Pell Grant awards.
- Between 1980 and 2011, the federal government provided about $403 billion in Pell Grant funds.
- In 2010-2011, 21 percent of recipients of the Pell Grant were families with declared incomes of $40,000 annually.
- Furthermore, 3 percent of recipients were families with declared incomes of $60,000 annually.
- Of those, 4,000 students qualified for the full amount of the Pell Grant.
In addition, student loan debt is increasingly becoming a problem as students borrow more and have fewer opportunities to find jobs that allow them to repay their debt. This means that taxpayers are on the hook for students that default on their loan.
- In 2012, there was a total $1 trillion worth of outstanding student loan debt.
- In 2012 alone, $85 billion had been taken out in loans.
- Moreover, from 2006 to 2009, the percentage of students defaulting on their loans rose from 5.2 percent to 8.8 percent.
Despite the billions that have gone toward making college affordable, there are low returns on the investment in the nation's students.
- Only 58 percent of full-time undergraduate students are graduating with a degree in six years.
- In 2009, 29 percent of borrowers dropped out of college, compared to 23 percent in 2001.
- The average student still takes an average of $25,000 and works part-time to pay for school.
Even with state governments shouldering a heavy load of education costs, students are still struggling to pay for a college education. Federal aid, in its attempt to make college affordable by spending billions, has failed to do so in the face of rising costs associated with getting a degree.
Source: Chad Miller, "The Past and Future of Higher Education Finance," American Action Forum, August 2012.
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