College Affordability: Bush Administration Fails To Respond To Growing Problem

A college education can provide the skills and knowledge needed to develop one's full potential and succeed in an increasingly competitive global economy. Through grants and subsidized student loans, the federal government has played a crucial role in making college more affordable for millions of students. But the cost of a college education continues to escalate and recent changes in financial aid are making things worse.

More must be done to make college affordable and to provide equal opportunity to all. Republicans have failed to adequately respond to the college affordability problem, but Democrats have an agenda to assist qualified students attend college, regardless of their financial means.

A College Education Is Difficult to Afford

A college education has never been more important, but the cost continues to rise. Tuition and fees are rising faster than household income, and the financial burden is falling heaviest on working families.

• Average tuition and fees have risen to $20,082 for a private four-year college (a 16 percent inflation-adjusted increase since 2000-2001), $5,132 for a public four-year college (a 35 percent inflation-adjusted increase), and $2,076 for a public two-year college (a 17 percent inflation-adjusted increase). (College Board, October 2004)
  
  
• Increases in tuition grew about three times faster than increases in the income of middle- and low-income households during the 1990s. For low-income households, the percentage of their income needed to pay tuition was 56 percent in 2001-2002, up from 32 percent in 1981-1982 and 46 percent in 1991-1992. The financial burden on middle-class households has also increased: from 8 percent of income in 1981-1982 to 11 percent in 1991-1992 and 13 percent in 2001-2002. (Congressional Research Service, October 3, 2003)
  
  

Recent Changes Are Making The Situation Worse

A flawed financial aid formula is reducing assistance to students. Students and their families are being forced to pay more before they qualify for financial assistance due to a recent change in the financial aid formula's treatment of state taxes. Many are losing eligibility for federal grants, seeing the amount of those awards decline, and experiencing more difficulty accessing subsidized student loans.

• A New York Times analysis published recently found that a middle-income family will have to pay an average of $1,749 more in 2005 than it did in 2000 before qualifying for financial aid - even with no change in income and assets. (New York Times, June 6, 2005) A typical student at a four-year college faces $5,800 in unmet needs each year. (Business-Higher Education Forum, 2005)
  
  
• A Government Accountability Office (GAO) analysis found that changes in how the financial aid formula treats state taxes will force a majority of families (61 percent) to contribute more to tuition costs for the 2005-2006 school year. About 35 percent of students will have their Pell Grants decreased, and an additional 81,000 students will lose their eligibility for Pell Grants. The formula change will also affect the amount of subsidized Stafford and PLUS loans. (GAO, March 22, 2005)
  
  

The Bush Administration decided to implement this revision in December of 2004 even though: 1) it knew the change would make college less affordable for many students; 2) the methodology and data sources used by the Department of Education were flawed; and 3) Congress had blocked the Department of Education from making the update in 2003. Democrats strongly object to this revision and have introduced legislation, S. 15, to ensure that no student would have his or her Pell Grant assistance reduced as a result of the formula change.

A shift from grants to loans could create a barrier to college. Students are increasingly relying on loans to finance their college education. In 2000-2001, financial aid for undergraduates was split evenly between grants and loans (46 percent each). But since then, loans have become the predominant form of financial aid, accounting for 49 percent of financial aid, with grants accounting for 44 percent. (College Board, October 2004) More loans mean greater indebtedness, which can deter some students from pursuing a college degree.

The Bush Administration has proposed an inadequate $100 a year increase in the maximum Pell Grant over the next five years. The proposal is far short of the increase that President Bush promised during the 2000 campaign and fails to keep pace with the rising cost of college. This small increase will not even offset the lower awards and reduced eligibility for Pell Grants that are occurring because of the Administration's recent decision to permit a revision of the Pell Grant formula.

Democrats believe Pell Grants must be increased significantly to ensure that college is affordable to all and to prevent students from graduating with a burdensome debt. In S. 15, Democrats called for a much higher increase in the maximum Pell Grant than the President has proposed: an increase to $5,100 for the 2006-2007 school year. Democrats also support adequate funding for work-study, graduate education, and federal Supplemental Educational Opportunity Grants (SEOG) to account for the increasing cost of college. In addition, Democrats want to expand the deduction for college tuition, create a tax credit for student loan interest expenses, and increase access to HOPE and Lifetime Learning tax credits.

More merit-based grants could create problems for students with financial needs. With tuition rising, a sufficient amount of need-based aid is critical. But the percentage of state grants going to need-based grants is shrinking as the percentage going to merit-based grants is increasing. While the amount of state need-based grants remains higher than state merit-based aid, the percentage of state grants for undergraduates based on merit has increased from 13 percent in 1994-1995 to 26 percent in 2003-2004. (National Association of State Student Grant and Aid Programs, May 2005). Moreover, many colleges are using merit-based grants to attract top students and raise their national ranking.

Despite these trends, the Bush Administration has not developed a plan to enhance need-based aid. In addition to not proposing an adequate increase in the maximum Pell Grant, the President has proposed eliminating the Leveraging Educational Assistance Partnership (LEAP) program, which provides matching funds to states to encourage them to provide need-based state grants. Democrats recognize that need-based grants are essential and support restoring funding for the LEAP program, which is providing needed assistance to over a million students.

Racial and ethnic minorities continue to be less likely to enroll in college. The enrollment of minority populations in post-secondary education has increased since the Higher Education Act was first enacted, but participation rates for African Americans and Hispanic Americans continue to lag behind whites and Asians. Among high school graduates age 15 to 24, 37 percent of African Americans and 34 percent of Hispanic Americans were enrolled in an undergraduate institute, compared to 41 percent of whites and 51 percent of Asians. (Congressional Research Service, February 9, 2005)

Instead of working to reduce this gap, the Bush Administration has proposed eliminating two TRIO programs and the GEAR UP program, which provide services to help disadvantaged students complete high school and enter and succeed in college. Democrats recognize the value of these programs and support restoring funding for them.

State fiscal problems have contributed to increases in public college tuition. While public colleges are less expensive than private colleges, their tuition is increasing more rapidly. State fiscal problems have contributed to these tuition increases by limiting state funding for public colleges. For the past three years, students in public colleges experienced larger increases in tuition and fees than students in private colleges. Tuition and fees for public four-year colleges increased by 9 percent in 2002-2003, 13 percent in 2003-2004, and 10 percent in 2004-2005. (College Board, October 2004)

Tuition increases at public colleges would likely have been even higher if Democrats had not championed providing fiscal relief to states. In 2003, Congress approved $20 billion in temporary fiscal relief to states, including $10 billion that states could use to cover budget shortfalls and minimize cuts to programs. The Bush Administration had opposed state fiscal relief, but the President ultimately signed it into law.