Poverty, race, and the failure of public policy: The crisis of access in higher education

We are failing in our democratic mission to extend educational opportunity to all our citizens.

AS A PUBLIC POLICY ANALYST WHO STUDIES access to higher education, I work in two worlds. One of those worlds-the real one outside the Washington, D.C., "Beltway"-is relentlessly and often brutally driven by economic forces that require participants to have ever-greater levels of education and training to succeed. It is a world in which global forces compete, technology rules, and change occurs daily. The rich are getting richer, the poor are getting poorer, and the racial and ethnic mix is becoming more diverse. In 1960, for example, about 7 percent of U.S. high school graduates were members of minority groups; by 2012, about 40 percent will be.

In the "human-capital economy" that dominates this world, honesty and hard work are no longer sufficient for success; individual and social welfare are increasingly determined by formal education for men and women, for all racial and ethnic groups, in every corner of the country.

The other world in which I work-the political world inside the Beltway-is driven by elections, polling, partisanship, "budget firewalls," competing priorities, deals, and revenue projections. This political world sometimes seems to function independently of the economic and demographic worlds it purports to support and from which it derives its authority.

The disparities between these two worlds create a need for my job, and they make my work interesting, challenging, and usually frustrating. I try to bring the worlds outside the Beltway closer to those who make policy inside it: to link the real and the political worlds. I do so by presenting policy makers with economic and demographic data related to students' opportunity to participate in higher education. My goal is to help them make more effective, efficient, and beneficial decisions regarding legislation and appropriations.

Education and Income

As I have suggested, there is no simpler, more direct, or more important determinant of human welfare today than educational attainment. In almost every way, people with more education enjoy a higher standard of living. They live longer, have better health, and are happier and more productive than those with less education. (The single downside is anxiety: bettereducated people report more stress, perhaps because they have many more choices in life than the less well educated.)

A useful measure of people's living standards is their income, or the resources they have to sustain and enrich themselves. The U.S. Census Bureau and other sources document the relationship between education and income for individu als, families, households, cities, states, and the nation. Or average, more education leads consistently to more income and the higher living standards to which most people aspire (see figures 1 and 2). This tie between edu cation and income has been getting stronger since the early 1970s, the dawn of the human-capital economy.

Not surprisingly, less education has led to less income and lower living standards since the early 1970s. Again, this relationship holds true for individuals, families, households, cities, states, and the nation. Because of the growing link between education and income, the least educated are living increasingly desperate and hopeless lives. Their futures and those of their children are immediate casualties, but so, too, are their neighborhoods, cities, and states. Eventually, those ignored by the economic and political systems return to challenge us in other ways. We cannot escape social responsibility for their welfare; we will ultimately have to face it in a future reckoning.

Cutbacks in Investment

Paradoxically, as we have come to depend on education in general and higher education in particular for our private and social welfare, we have sharply reduced social investment in higher education. This decline, which began about 1980, has occurred mainly at the state level. States have decided that building and filling prisons and providing health care to poor people through Medicaid are more important budget priorities than investing in the higher education of young people. Measured in many ways, we are allocating a declining share of state resources to higher education.

Expressed as a share of statewide per-capita personal income (the tax base for state appropriations), state tax funding in fiscal 2000 for higher education was $23.4 billion below the peak reached in fiscal 1979. The 2000 appropriations were about 77 percent of the 1979 state tax effort.

Expressed as a proportion of gross domestic product, expenditures by state and local governments for higher education in 1998 were $20.9 billion below the peak reached in 1982. The 1998 expenditures were 74 percent of the peak 1982 level.

Historically, states have assumed the primary responsibility for fostering opportunity for postsecondary education and training. Their investments in higher education have allowed public campuses to expand far beyond what private institutions could afford to support; as a result, about 78 percent of college students today are enrolled in state institutions. The public's demand for quality education has led states to support academic missions that respond to high expectations regarding faculty and other resources. And the need to make higher education accessible to most citizens has meant low tuition charges in public institutions. A few states have taken an additional step and created their own need-based grant programs to assist students from low- and lower-middle-income families when low tuition alone has not made college affordable.

The sharp reduction in state investment in higher education starting about 1980 has, however, curtailed the commitment to educational opportunity in every state. The cutbacks have resulted in an oversupply of unskilled workers in the labor market and shortages among workers with the highest levels of education and training. The reductions have also produced a large and growing gap between the compensation of faculty at private colleges and universities and that of professors at public institutions. If this gap continues to expand, it will tend to reallocate quality faculty from public to private universities over time.

But most important, the decline in state funding has made college less affordable, and therefore less accessible, for many students. As states have reduced their investments in higher education, institutions have raised tuition and fees to offset the loss of state support. The charges to students have risen far faster than family incomes (especially for minorities and for those families that earn the least), and more sharply than state or federal grant aid to students. No more than a dozen states have made any serious effort to help students from low- and moderate-income families pay the higher costs that have resulted from these state decisions.

Moreover, since the early 1990s, some states have followed the lead of Georgia in moving from need-based financial aid to merit-based aid. In 1982 need-based support accounted for 90.9 percent of state financial aid to students. By 1990, that percentage had dropped to 88.3; in 1999 it hit a low of 80.5. This change has shifted state assistance from needy college students to many students who are not financially needy. Four-year institutions, both public and private, are doing something similar by becoming more selective in admissions and by practicing preferential financial-aid packaging to compete for less financially needy students.

At the federal level, where most student financial aid originates, a cost shift from taxpayers to students has occurred over the past twenty years, when the federal government has been unable or unwilling to make up the difference between higher education prices and what families could afford. So the purchasing power of the federal Pell Grant has declined and today buys about half as much higher education as it did at the end of the 1970s. Figure 3 shows the drop in the percentage of institutional charges covered by the maximum Pell Grant award between fiscal 1974 and fiscal 2000.

During the past two decades, the federal government has also aggressively expanded educational loan programs, with more of the costs of these programs borne by borrowers instead of taxpayers. Unfortunately, students from low-income families tend to view loans as barriers-not vehicles-to participating in higher education.

In 1997 the president and Congress enacted the Hope and Lifetime Learning Tax Credits. These tax credits are worth up to $1,500. Since they are not based on need-the income limit is $100,000-much of their benefit goes to families that do not depend on them. And because they are not refundable, families too poor to pay federal income taxes (those with incomes below about $18,000) are excluded from this program. As of this writing, the president has proposed raising the maximum benefit from the credits to $2,800 a year and increasing the annual income limit to $120,000. If implemented, this plan will continue the exclusion of poor people from eligibility for the tax credit.

Overall, federal financial aid based on need reached a high in 1986 of 86.4 percent of federal support for postsecondary students. Since then, it has continued to decrease; by 1999, the percentage was 60.5, or about what it was in 1964.

As taxpayer investment in higher education has declined, the expected contribution of parents toward the higher education of their own children has also dropped. In the federal assessment for need-based financial aid, parents have the first level of responsibility for financing the education of their children, to the extent that they have the income and assets to do so. But Congress sharply reduced the "expected family contribution" from parents in 1978 when it enacted the Middle-Income Student Assistance Act. It did so again in 1992, when it removed home equity from need analysis. A third reduction occurred in 1997 with enactment of the Hope and Lifetime Learning Tax Credits.

These reductions have not helped students from low-income families, whose expected family contribution was already zero and whose federal income-tax liability was zero. The changes benefit only those families with enough income to generate a positive expected family contribution, and the greater the expected contribution, the greater the parental benefit. The most recent reduction in support expected from families-which came in the form of tax credits-fully assists those who pay at least $2,000 in federal income taxes. Those too poor to have a federal income-tax obligation receive no benefit.

Of course, someone has to pay for college. That leaves students with the unmet bills from high institutional charges, reduced taxpayer support, and lagging parental contributions. As a result, students today work more hours and borrow more through educational loans than they ever have before. Some evidence shows that excessive hours spent working and formidable student loan debt have come to interfere with the learning experience of students.

Closing of the Door

This cost shifting from taxpayers and parents to students amounts to reintroduction of the price barriers to higher education that the federal government and a few states worked so hard to reduce in the 1960s and 1970s. Families earning more than about $75,000 a year have not felt these barriers, yet they have been devastating for those families earning less than $25,000 a year.

Gaps in educational attainment among students born into families with different income levels are nothing new. But government intervention reduced these gaps in the 1970s. In 1970 a student from a family in the top income quartile (annual earnings of more than about $75,000 in 1999 dollars) was six times more likely to complete a bachelor's degree by age twenty-four than a student from the bottom quartile (annual family income of less than $25,000). (I calculated income quartiles from data reported by the U.S. Census Bureau.) But by 1980, the attainment rate for a student from the top quartile had dropped to only four times greater than that for a student in the bottom quartile.

In the 1980s and 1990s, however, the gap started to widen again. Today, students born into families in the top income quartile have never had it so good. But students from families in the bottom quartile have never had it so bad. The high school graduation rates of bottom-quartile students have remained steady (at unacceptably low levels), and the rate at which this group has continued on to college after high school has even increased (although it is well below the rate for students from families with higher income levels; see figures 4 and 5). But the rate at which students from the bottom quartile complete bachelor's degrees has declined substantially since the early 1980s (see figure 6).

Even though completion rates for students from families in the second and third income quartiles have increased over this period, the disparity in attainment of bachelor's degrees across family income levels has never been greater. By the mid 1990s, a student from a family in the top income quartile was ten to twelve times more likely than a student from the bottom quartile to have completed a bachelor's degree by age twenty-four. (Data from the U.S. Census and other sources on the attainment of bachelor's degrees by family income first became available in 1970.)

Public Policy

Until about 1980, public policy reflected the public's perception of education as the vehicle for social mobility. Policies on the state and federal level supported the talent and ambition of those who wanted to move ahead in life by trying to remove financial and other barriers to educational opportunity.

But since 1980, public policy has moved ever more aggressively away from that broader view of educational opportunity. As I have noted, the focus of financial-aid programs has gravitated away from low- and lowermiddle-income students and steadily toward uppermiddle income students; in the latter half of the 1990s, it began to drift toward the highest-income families.

But financial aid is not the only area in which public policy has abandoned students from low- and lowermiddle-income families. Public and private four-year colleges and universities have become more academically selective over the past fifteen years, and we are fast retreating from affirmative action on behalf of underrepresented groups in higher education. In other words, the social policy tools supporting inclusiveness in the missions and programs of colleges and universities have eroded over the past two decades. And this erosion is now beginning to show up in declining overall social and private investment in higher education. The sum of what federal and state taxpayers, students, and their families pay for higher education represented a shrinking share of America's gross domestic product throughout most of the 1990s.

Is higher education becoming irrelevant? No, of course not. But as colleges and universities-especially four-year institutions-become less available to low- and lower-middle-income students, higher education has come to serve mainly a group, made up mostly of affluent white students, that represents a shrinking share of the U.S. population. Although it serves that group well and comfortably, higher education is without doubt becoming increasingly elitist (see figures 7 and 8).

There is little good to say about what our political leadership is now doing for higher educational opportunity. In the 1960s and 1970s, econometric research on the effects of price and financial aid on student enrollment guided policy development. Today, such research is being ignored in favor of voter rates and profiles. The preferences of middle-income and affluent voters now determine the allocation of a growing share of student financial aid.

Some might call this pandering. Without any social or economic justification, money in the form of merit scholarships, tax credits, tax-favored college savings programs, relaxed needs analysis, tuition freezes or rollbacks, and other expensive political boondoggles are being used to buy votes. In the meantime, the demonstrated unmet financial needs of students from families with incomes of less than $40,000 a year are being ignored (see figure 9).

Over the past two decades, higher education has become a tool to preserve and strengthen social stratification and an important force dividing Americans. It is making the rich richer and the poor poorer. Some day, when historians review our period, they may see what we have done more clearly than we do today. But it is already clear that we cannot sustain forever the social results of the federal, state, and institutional decisions regarding higher education that have been made over the past twenty years. We can see too many signs of failure already to have much confidence about our future social health. el

Thomas Mortenson is senior scholar at the Center for the Study of Opportu

nity in Higher Education and a higher education policy analyst at Postsecondary Education Opportunity. An earlier version of this article was presented as a conference titled "Future of the City of Intellect," held at the University of California, Riverside, February 17-19, 2000. For more information about the subject of this article, visit .

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