Illinois college grants loan

On Oct. 8, 1956, New York Yankees pitcher Don Larsen retired one Brooklyn Dodger after another for nine straight innings until a final called strike distinguished his performance as the only perfect game in World Series history. As stunning as his final pitch was in closing the door on perfection, the ball itself now may be used to open doors for Larsen's grandchildren. Concerned about the rising cost of college education, Larsen is auctioning that last pitched ball, as well as the glove he wore on that day 46 years ago, to try to pay for the education of his grandchildren.

This decision reflects the choices tens of thousands of families make each year as the cost of postsecondary education continues to rise at a rate faster than inflation. According to the National Center for Education Statistics, by 1995-96 nearly 50 percent of undergraduate students were receiving financial aid and, among full-time students, 68 percent received federal or state financial aid.

In 1970, financial aid to all students was equivalent to $11.15 billion in constant 1998 dollars, but that figure increased dramatically as more students began enrolling in two- and four-year colleges and universities. By 1998-99, the total amount of financial aid available to students had reached $61.8 billion. A year later, 56 percent of all undergraduates were receiving it.

In addition, the nature of aid underwent a change as well. Although evenly split at the beginning of the 1990s, by the 1999-2000 school year aid in the form of loans (59 percent) had surpassed federal and state grants (40 percent).

Despite the rising costs, college enrollment during the 1990s continued its rise from 60 percent of high-school graduates to 63 percent, according to the Institute for Higher Education Policy (IHEP).

Deputy Education Secretary William Hansen looks at the flip side of that statistic as a cause for concern. Addressing the Student Financial Assistance Spring 2002 conference in March, Hansen underscored the long-term importance of earning a degree. "Forty percent of our high-school graduates do not enroll in postsecondary education. That is a startling statistic when you consider that 80 percent of the jobs that are growing and providing self-supporting salaries in our economy require some postsecondary education and training," he said.

A confluence of economic and demographic factors, as well as a failure of financial aid and household income to keep pace with rising tuitions, has resulted in troubling trends relating to the affordability of a college education. More worrisome is that the trend seems likely to continue.

In its analysis, Losing Ground: A National Status Report on the Affordability of American Higher Education, analysts from the nonpartisan National Center for Public Policy and Higher Education (NCPPHE) found students face "relatively stable tuition in good times, have enjoyed tuition freezes and even reductions in the most prosperous times and have suffered steep price increases during recessions." In a time of political sensitivity, "many states find cuts are easier to make in higher education than in health care or other social services."

According to IHEP President Jamie Merisotis, "When you look at the tuition levels and the net price, which is basically the tuition minus any grantage, the net price is increasing faster in public institutions for both the low-income and middle-income students. It's a more complicated picture in the private institutions.... Part of the reason for this is because they pour more of their own money back into financial aid and scholarships."

Thus, in many private institutions, students paying full price are subsidizing the education of lower-income students whom the educators court for diversity purposes. In fact, Merisotis says, the largest single expenditure at private institutions in the last decade was on need-based financial aid.

In public institutions the financial challenges are exacerbated by current economic conditions. According to Merisotis: "My assessment is that in a longer-term historical trajectory, state budgets have been impacted by other costs--Medicare, prison costs, etc. And so if you look at the proportion of state budgets allocated to support public institutions, it is actually declining, and so the way public institutions try to make up for that is through higher tuitions."

Joni Finney, NCPPHE vice president, argues that while the states have performed well in the last decade, increasing funding in line with enrollment, the usual response to tough economic times "makes no sense." Acknowledging a certain degree of politicization of the budget process, Finney says, "In this recession, it really does not look good, but in past recessions there have been some states which have avoided the boom-and-bust situation. Illinois was one, but they are now taking a big chunk out of need-based financial aid.... States do not seem to handle good times any better than the bad. In good times we freeze tuition, when income is increasing. What we should be doing is increasing tuition incrementally during prosperous times."

Fashioning a comprehensive solution may not be possible any more than advisable, particularly with regard to public institutions. The picture there is complicated further by the myriad of laws that do or do not determine who sets tuition levels. The disparity between the states was detailed in a January 2002 report issued by the Lumina Foundation for Education, an Indianapolis-based nonpartisan research institute. The report found that in only seven states (Arkansas, California, Hawaii, Maryland, Montana, New Mexico and Washington state) are as many as one-fifth of private four-year colleges affordable to low-income dependent students. In response to rising costs, governments on the state and federal level have responded with a number of tax-credit proposals and financing systems to alleviate the financial burden.

U.S. Education Secretary Rod Paige announced an additional $1 billion had been included in the emergency-spending measure President George W. Bush signed in early August. And Paige said $22.7 billion in education-related benefits--from tax credits to greater allowable contributions to savings accounts--were included in the tax measure Congress passed in 2001. For the most part, such funding remains a responsibility of the states.

"My sense is that this is the traditional role of the states. [But] the Bush budget is underfunding education. Are there any programs out there we are developing? I think the answer is no," says Jim Manley, spokesman for the Senate Health, Education, Labor and Pensions Committee. Manley says the committee primarily is focused on reauthorization of the Higher Education Act of 1965.

Funding of financial-aid programs will be debated further in the 108th Congress when the Higher Education Act comes up for reauthorization, as will the question of whether to raise student-loan limits, which have remained stagnant for more than a decade. According to the Lumina Foundation, a majority of students graduated with student-loan debt in 1999-2000, including more than 60 percent of those who earned a bachelor's degree. In the wake of passage of a 1992 congressional measure to open up unsubsidized loans, loan volume increased 50 percent regardless of income, the foundation notes.

Jerry Davis, vice president of the Lumina Foundation, says, "I think our general concern is that students are borrowing more in this particular economy, more than they can reasonably afford. We estimate that one out of six undergraduates has a debt burden of more than 10 percent" of their paycheck in their first job. According to the foundation, seniors at public four-year universities owe an average of almost $13,000 in student loans. Furthermore, Davis adds, students pursuing liberal-arts or communications degrees, as opposed to science and business degrees, continue to experience greater debt burdens as a result of the lower salaries in those areas.

According to the Losing Ground report, the biggest burden falls on low-income students who borrow less but who also tend to attend less-expensive community colleges for two years. Seniors from the poorest one-fourth of families owe an average of $12,888, up from $7,629 in 1990--a 69 percent increase, says the report. The problem of student-loan debt is further exacerbated by the fact that many students in all categories are charging school expenses on credit cards, which carry much higher interest rates than do low-rate loans.