Blog: The Educated Reporter

New Study: College Cost Relief from Government Favors Families with Higher Incomes

While college completion is a predictor of future economic success, governmental support for post-secondary education costs tends to favor wealthier families, a new study [PDF] from New America Foundation finds.

Even though the perks of a college education are well-told, the odds are stacked against students of low-income families to enroll at a two- or four year institutions. Not helping matters are restrictions on how much such families that receive public assistance can save, the authors of the report find. Other times, uncertainty on terms and rules lead low-income families to unnecessarily opt out of college savings programs they feel might make them ineligible for other types of social aid. 

Between rising tuition, cuts in needs-based college assistance, and stagnant wages among the nation’s lower rungs, college completion is trending at low rates for students from poor families. The authors of the report note that students from families with incomes at the lowest quintile nationally are completing college are 30-year lows. While median family income has increased 147 percent since 1982, tuition and housing costs have risen by 439 percent.    

Even with government-provided higher education grants, families earning less than $30,000 a year would be on the hook for college expenses totaling 55 percent of their income to cover the remaining price tag for educational expenses, the authors found. Take a look at the chart provided in the report below for what families from other income brackets have to pay. The cost burden is decidedly less. 

Even the Pell Grant, the largest patch of financial aid awarded  to low-income students, hasn’t been able to keep up with new expenses education costs: While during the 1987-88 school year the grants covered 50 percent of expenses on average, in 2009 that share dropped to 35 percent. State grants are being watered down, as well. The authors relay that in 2008-2009, 72 percent of state grant dollars were doled out based on need, compared to 89 percent two decades ago.

Several policy proposals are provided in the report, such as passage of the ASPIRE Act–a federally-backed savings plan for all newborns with initial seed money–and reforms to other college savings plans that make them more manageable for low-wage families with students seeking a post-secondary education.