That 40 million college graduates have accrued $1.2 trillion in debt is an issue that most people would agree cannot be ignored, but few stakeholders have been able to compromise on a course of action. The situation is particularly dire for African American students who face disproportionate amounts of debt, and in some cases, rising costs are having a negative effect on their representation in higher education.
The good news is that state spending on higher education has increased for the third year in a row, according to the Grapevine report, an annual analysis of state appropriations for higher education. Conducted by the Center for the Study of Education Policy at Illinois State University and the State Higher Education Executive Officers association, the report shows that funding grew an average of 4.1 percent in 39 states between 2015 and 2016. Unfortunately, only Alaska and North Dakota are spending as much as they did on their public colleges and universities as they were before the economic downturn in 2008.
READ: States Slow to Increase Funding
for Higher Education, with Only Two
at Pre-recession Spending Levels
Cuts vary state to state, though. For instance, in Louisiana, state funding for higher education decreased by 41 percent, but New York and Indiana cut funding less than 10 percent, according to a 2016 analysis by advocacy group Young Invincibles.
“States’ budgets and economies are tightly interrelated,” says Frank Ballmann, director of federal relations at the National Association of State Student Grant and Aid Programs (NASSGAP). “States that had a lot of income from oil revenue a few years ago were doing well, but not so much anymore.”
The cuts states made between 2008 and 2012 were an attempt to balance budgets, but without increasing revenue from sources such as increased taxes, public colleges and universities were forced to raise tuition, leaving parents and students to foot more of the bill. Families, on average, now cover half of the cost of tuition at public colleges, whereas in 2008, their share was around 38 percent, according to Young Invincibles’ analysis.
“In the past couple of years, states have started to reinvest, but the question is, will they choose to sustain the reinvestment?” says Michael Mitchell, policy analyst in the division of State Fiscal Policy at the Center on Budget and Policy Priorities (CBPP). “In the next few years, there will likely be another recession. Are broader budget questions being asked?”
“Tax cuts have been very widespread as the economy has bounced back, and certain budgets and rainy day funds have not been replenished,” he adds. “States could raise taxes, but that is very unpopular and unlikely to happen.”
Mitchell says that tuition hikes and the constant barrage of bad news related to cost and student debt deters many low-income and minority students from enrolling or staying in college.
“From the student perspective, this can go three ways,” says Mitchell. “If a student is reading the news and sees that their state is considering making cuts and raising tuition — if that student is from a lower socioeconomic background, or they are a student of color, they’re less likely to enroll. Second, if that student is already on campus and tuition rates go up, they are more likely to drop out because they think they can’t afford to go to college anymore. And that’s almost as bad as not going because now they have no diploma, but they have a huge debt burden.”
There is evidence of this situation in Illinois, a state $640 million behind on payments to its public colleges and universities and $31 million behind on financial aid payments.
Illinois has been without a budget since July 2015, due to political gridlock between Democrats and Republican Gov. Bruce Rauner. The state has struggled financially for a number of years, and African American undergraduate enrollment at public four- and two-year institutions dipped by 8.24 percent between 2012 and 2013. Yet, tuition and fees have annually increased, and the University of Illinois’ (UI) flagship campus in Urbana-Champaign enrolled a mere 5.5 percent African American students last year.
In addition to choosing not to enroll, Mitchell thinks African American students may sell themselves short by attending less prestigious institutions because of lower sticker prices.
“That third bucket involves students who are really talented and smart, but when they see the high cost of some of those top-tier schools, they drop down and go to a less competitive school,” he says. “But research shows that they would have earned more over their lifetime if they’d gone to a better school.”
Indeed, patterns of enrollment and debt accumulation among African American students confirm Mitchell’s assessment. African American enrollment in postsecondary education has skyrocketed in the last two decades, but overall, the percentage of black students at top-tier institutions — such as Ivy League schools and prestigious research institutions — has remained flat at about 6 percent since 1994.
Further, African American students take out more loans — and more often — to finance their undergraduate education than any other ethnic group. A report by the public policy organization Demos found that 80 percent of black students take on debt, compared with 63 percent of white and Latino students. African American students also accrue more debt, at an average of $28,692, which is nearly $4,000 more than the average for all students. High dropout rates for African American students — 39 percent — exacerbate the problem, the report suggests.
Perhaps more troubling is the fact that African Americans are more likely than any other ethnic group to enroll at for-profit institutions, where graduates leave with the highest levels of debt than from any other higher education institution. Nearly 26 percent of all students in the for-profit higher education sector in the fall of 2014 were African American, according to the U.S. Department of Education. And in the 2011-2012 academic year, 48 percent of for-profit degree recipients accumulated a debt burden of $40,000 or more, the College Board reported; only 12 percent of graduates of public four-year universities graduated with that much debt.
Grant Funding Lags Behind Soaring Tuition Costs
Researchers in Illinois say cuts made to the Monetary Award Program (MAP), the state’s need-based grant program, also contributed to enrollment declines. A decade ago, MAP grants were awarded to all students who applied. By 2013, however, about half of all applicants received MAP grants. Amid the ongoing budget stalemate, Gov. Rauner vetoed a bill proposing $397 million to MAP that would have provided access to higher education for hundreds of thousands of students.
The budget crisis in Illinois is, fortunately, an anomaly. In fact, overall state funding for need- and non-need-based grants increased by 2.3 percent over the last year, according to data from NASSGAP. The data show that overall, need-based awards comprised around 75 percent of total aid awarded to students in the 2013-2014 academic year.
“I would disagree with the premise that less money available to states has meant states have shifted funds away from need-based aid to merit-based aid,” Michael Solomon, manager of policy analysis of NASSGAP Illinois, said in an email. “I would assert that many states are focusing their limited funds on broad need-based aid that benefits lower-income households.”
NASSGAP tracks state grants, but it does not disaggregate by race or ethnicity who receives what types of financial aid.
Ballmann says state-awarded grants vary depending on a state’s economy and the decisions made by its lawmakers and voters. However, he thinks that most students with proven need should be able to cover the cost of in-state tuition with maximum state and federal Pell Grant awards, provided they seek them out.
“I know there are studies that show suburban white kids have better test scores and get a disproportionate amount of non-need-based aid, but I think that’s where the Pell Grant comes in to level the playing field,” he says. “Louisiana, recognizing the importance of students getting Pell Grants, is requiring students to complete the FAFSA in order to get their high school diploma. We know there are two million students attending college who are eligible for Pell Grants who don’t apply, so imagine how many more eligible students are not going to school at all.”
Across the board, high school graduates left roughly $2.7 billion of free federal student aid unclaimed during the 2014-2015 application cycle, according to an analysis by NerdWallet, a personal finance website. Its study assessed how many high school seniors in the U.S. failed to complete the Free Application for Federal Student Aid (FAFSA) and how many would have likely been eligible for need-based federal financial aid.
The calculations take into account all high school seniors — using projected graduation rates — whether or not those students intended to or did eventually enroll in college. The analysis found that 1,445,732 high school graduates failed to fill out or complete the FAFSA application, and an estimated 747,579 of those students would have qualified for a federal Pell Grant.
Unfortunately, the federal Pell program and state grant funding have not kept up with inflation and rising tuition costs. Further, median family income declined by 0.2 percent annually between 2005 and 2014 after two decades of yearly increases. The maximum Pell Grant award for the 2016-2017 academic year is $5,815 and covers only about 30 percent of average tuition costs at a public four-year institution. In 1980, the maximum Pell Grant covered three-fourths of those costs.
President Barack Obama has taken a number of steps to help students stretch Pell Grant funding. His latest move came in the budget he proposed in February in which he called for permanently tying the maximum Pell Grant award to inflation. A current provision in the program that already does this is set to expire next year.
Funding from Unlikely Sources Adds Up
With tuition rates outpacing income growth as well as state and federal financial aid levels, it behooves students and parents to look for funding resources wherever possible. This is the mindset Valerie Gregory of the University of Virginia (UVA) hopes to instill in students in her state.
Gregory is the director of outreach and associate dean of the Office of Undergraduate Admission at UVA. She says she and her outreach team communicate to high school students early on about available funding resources.
“Reaching students earlier is key; when you think about the time line of applying to college, students get caught up applying in the fall, but scholarships often have early deadlines, in December and January,” she says. “I hear from a lot of students that by the time they learn about a scholarship opportunity, the deadline has already passed. So we talk to juniors in high school, and I tell them that this is their job, applying for scholarships.”
Like most states, Virginia has struggled to bounce back from the recession; state funding for higher education dropped by 21 percent between 2007 and 2013, and tuition at its public four-year institutions is well above the national average. UVA has also seen a decline in African American enrollment since 2009, but Gregory thinks this has more to do with the way race is reported than with rising tuition costs. In that year, the federal government added the “multi-racial” designation, which counts any student who identifies as two races in one separate category.
“It’s like comparing apples to oranges, to look at enrollment before 2009 compared to after,” she says. “That’s not to say that there hasn’t been a decline, but it has probably been slighter than how it’s been reported.”
Gregory’s worries are focused on students from middle-class backgrounds who don’t qualify for need-based financial aid but still struggle to pay tuition and fees.
“What also tends to affect enrollment is what I call ‘the middle,’ those students from middle-income families who don’t qualify for need-based aid,” she says. “If you’re rich, you can write a check, no problem. Or if you are low-income, all those needs will be met at UVA. But if you are in the middle, it’s not going to be as easy. And I think that’s across the board, not just at UVA, that you have those middle income — and often African American — students who will qualify and get in but have trouble paying for college. That’s who we worry about.”
She encourages all students to look for funding resources, no matter the size of the aid package.
“There’s a lot of money out there that is just going to waste because no one is applying for scholarships,” she says. “Most people know about the big scholarships, but the small scholarships — students may think it’s just $500 here and $1,000 there, but if you get a lot of those, they add up.”
Until states create sound tax policies and increase revenue to help fund public higher education, students and parents are responsible for financing the college experience. In the meantime, families should follow the “1-2-3 Approach to Paying for College” — offered by private student loan provider Sallie Mae — and “start with money you won’t have to repay,” followed by taking out federal, then private loans.●
Rebecca Prinster is a senior staff writer for INSIGHT Into Diversity.