The Cost of College

How federal funding impacts tuition in the U.S. and how global trends affect affordability worldwide.

The Cost of College

AS UNIVERSITY TUITION continues to rise around the world, economists, analysts, and government agencies are looking at what factors contribute to the costs and what steps can be taken to help students afford to pursue higher education.

In the U.S., the link between federal aid and college affordability is the subject of a study conducted by Mark J. Warshawsky, a senior research fellow at George Mason University’s Mercatus Center in Arlington, Virginia.

In a series of charts available through the center website, he shows that average tuition and fees for undergraduate studies have increased more than threefold from 1980 to 2014, while federal and state grants and loans have grown from just over US$50 billion in 1994 to $170 billion in 2014. These figures, along with studies from other researchers, indicate that increased federal support for higher education leads to “a significant increase in tuition and decrease in institutional aid,” he suggests.

He also notes that “some students, particularly from nontraditional backgrounds, seem to have been harmed by the increase in federal funding of student loans. They have not seen increases in their incomes as workers, have often not completed their education, are more likely to default on their loans, and miss out on job-related income and training.”

Warshawsky concludes, “Further increases in federal support for higher education are not needed, and indeed are likely to be counterproductive, because they lead to higher tuition for all students. The resultant increase in tuition, decline in average student quality, and increase in student loan defaults should lead policymakers to question whether the massive increase in federal support for higher education is achieving its goals. A robust parallel system of on-the-job training, apprenticeships, and youthful practical work experience is needed, supported by changes in federal laws and regulations.”

While Warshawsky focuses on the situation in the U.S., other researchers examine the cost of college tuition around the world. A new policy paper from the Global Education Monitoring (GEM) Report and the International Institute for Educational Planning (IIEP) at UNESCO analyzes global trends and offers a series of measures designed to make higher education more accessible to all.

According to the study, the number of university-level students doubled to 207 million between 2000 and 2014, making it difficult for both governments and families to bear the cost of higher education. Only 1 percent of the poorest individuals have spent more than four years in higher education, compared to 20 percent of the richest. Disadvantaged groups also miss out. For example, in Mexico less than 1 percent of the indigenous population pursues higher education; in China, rural youths are seven times less likely to attend university than urban teenagers.

Access to higher education is greater in wealthy countries. In the poorest nations, only 8 percent of young adults are enrolled; in the richest, 74 percent. Gender disparities are more extreme in poor countries, as well. In 2014, women made up only 30 percent of the bachelor’s degree students in low-income countries.

Families often end up paying the costs of higher education, especially in high-income countries. Across 26 countries in Europe, households paid for 15 percent of higher education in 2011; that figure was 40 percent in Australia, 46 percent in the U.S., 52 percent in Japan, and 55 percent in Chile.

UNESCO, a U.N. organization with responsibility for higher education, advises governments to institute policies aimed at helping the disadvantaged pay for higher education, such as low tuition fees, need-based scholarships, and loan repayments adjusted according to income. The paper presents a range of examples showing how different countries are expanding higher education offerings to achieve greater equity.

The paper also makes these six recommendations: Make sure those who need help the most are getting it; guarantee equity and affordability in regulatory frameworks; establish national agencies to ensure equal opportunities; use different admissions criteria to respond to different individuals’ needs; establish an agency to coordinate different forms of student aid, such as loans and grants; and limit student loan repayments to less than 15 percent of a family’s annual income.

Read “Increased Federal Funding for Higher Education Produces Adverse Effects.”  Also, “Six Ways to Ensure Higher Education Leaves No One Behind.”

This article originally appeared in BizEd's September/October 2017 print issue. If you have comments or feedback on its contents, please contact us at bized.editors@aacsb.edu.