Politics & Policy

The Big Steal

Government funding for students means prosperity for schools.

College tuition and its add-ons make higher education the second largest expense (after home mortgages) for most American families. As a consequence, the cost of college has great potential as a political issue. Senator Kerry’s recent proposal to award $4,000 in public funds to every college student who signs up for a period of national service is only the latest in a long line of attempts to entice voters with the promise of easing this particular burden.

#ad#In January 1997, President Clinton proposed a program that would guarantee two years of college for every American and a tax deduction for tuition. The legislation never made it through Congress, but over the years plenty of other make-college-more-affordable measures did pass. The original model for such programs is, of course, the G. I. Bill, officially “The Servicemen’s Readjustment Act of 1944.” The G.I. Bill provided for a range of new veterans’ benefits, but it is best remembered for the provision that sent about 2.2 million veterans to college with government-paid tuition and a living allowance.

What is perhaps less well remembered is what the G.I. Bill meant to colleges and universities: an enormous windfall. Starved for students during World War II, campuses were suddenly crammed. Moreover, colleges spent next to nothing to build new facilities to accommodate the extra 2.2 million students, so most of the government funding from the G.I. Bill went straight to “surplus funds.”

In that sense, the G.I. Bill taught higher education an important lesson: that government funding for students is a relatively painless path toward prosperity. It also demonstrated that many students who might previously have been turned away as “not college material” could in fact rise to the academic challenge.

Historians of American education continue to debate exactly how much of a turning point the G.I. Bill really was. The number of Americans attending college had been climbing for decades, and so too had the percentage of college-aged men (and women) who actually enrolled in college. In 1900, for example, about 5 percent of college-aged kids went to college. By 1939, on the eve of WWII, it was up to 15.59 percent. It of course fell during the war, to a low of 11.9 percent in 1943; jumped to 17.55 percent in 1945; and then ballooned with the returning G.I.’s to 28.2 percent in 1946.

Thus the G.I. Bill didn’t suddenly introduce the idea of growth to higher education: It just accelerated an older pattern, and introduced a new variable. Instead of having to build their way slowly by attracting students either able to pay their way or willing to endure considerable financial hardship, colleges and universities could bound ahead with government-subsidized students. But what would happen when the returning G.I.’s earned their degrees and moved on? Would higher education revert to a slow-growth approach?

As it happened, no. The 1952 Veterans Readjustment Assistance Act extended G.I. Bill benefits to Korean War veterans; the 1958 National Defense Education Act for the first time offered federal support to students from low-income families. In 1963, Congress authorized loans for students pursuing degrees in health-related professions. And in 1965, Congress enacted the Higher Education Act, which bundled together other federal aid to students. Most significantly, the HEA included Title IV, which, though weighted with grants for impoverished students, also introduced the Guaranteed Student Loan program for middle-income families.

The Higher Education Act, frequently amended and reauthorized, rapidly grew in many directions, not least in the quantity of federal financial aid made available to students. In 1972, for example, the HEA amendments added Basic Grants (Pell Grants) and State Student Incentive Grants, establishing the Student Loan Marketing Association (Sallie Mae), and opened all Title IV programs to proprietary schools. In 1978 the Middle Income Student Assistance Act removed the family income limit on eligibility for federal student-aid programs.

Title IV has become the financial bedrock upon which higher education rests. Many colleges and universities could not exist without it, and all but a handful of the wealthiest and another handful of stubbornly independent colleges (e.g., Grove City College) rely deeply on the flow of income from students who receive federal support. Overall, about 40 percent of the nation’s 15.1 million college students receive some federal aid. For four-year, private, doctorate-granting universities, like the one at which I teach, about 55 percent of students are on federal aid. In all, Title IV funds amount to over $60 billion for colleges and universities. By comparison, the total amount of federal research money spent on higher education, including every morsel of pork, is about $20 billion. Title IV funds in aggregate account for about 16 percent of total revenues in American higher education ($377 billion in 2000).

Some folks look upon the history of federal aid to college students with a great deal of satisfaction. The Brookings Institute, for example, recites some of this history as one of the “Government’s Fifty Greatest Endeavors.” And the American Council on Education (ACE) proudly takes credit for its nonstop lobbying in favor of still further expansion in federal aid programs to students. Surely the advocates of these programs are right that federal support for students has succeeded in massively increasing “access” to higher education. Lots of people go to college who wouldn’t, absent the strenuous federal subsidy programs–which, of course, come on top of more than $5 billion the states spend on student aid.

And yet, with all this support, college remains frighteningly expensive to American families. Some 82 percent of the respondents in the Chronicle of Higher Education’s 2003 survey agreed that “it is very difficult for a middle-class family to afford a college education.” It seems that at least once a year a major news magazine re-discovers the crisis in college affordability. Last year, Rep. Howard (Buck) McKeon (R., Calif.) introduced a bill that would penalize colleges that raise their tuition at more than twice the national inflation rate, but McKeon withdrew his bill in early March. And rumors that President Bush would use part of his State of the Union speech this year to urge colleges to hold down tuition proved unfounded. On the federal aid front, Bush called for larger Pell Grants and more support for community colleges.

Why is college so expensive? Why does federal aid never really succeed in making college more affordable? These shouldn’t be deep mysteries. For over a decade I participated in university meetings aimed at determining my university’s annual tuition increases. The only real question was, “How much can we get away with?” And the only real worry was that, if we overreached, we might move to the dreaded top of the list for largest increases. Most years, it fell to me to draft a letter to parents from the Chairman of the Board explaining that the tuition increase reflected this or that combination of new construction projects and programs.

Title IV funds and other federal financial aid are seen by colleges and universities as money that is there for the taking. Tuition is set high enough to capture those funds and whatever else we think can be extracted from parents. Perhaps there are college administrators who don’t see federal student aid in quite this way, but I haven’t met them. But I don’t mean to imply that college administrators are driven solely by profit maximization. One reason that many prefer sky-high tuitions is that it enables them to act as social engineers. The larger the income from tuition, the more money they have on hand for scholarships for students who cannot afford the tuition.

One might think that the easier way to expand access for impoverished students is to maintain low tuitions, and indeed some colleges do just that. But it isn’t the prevailing pattern. Perhaps that is because many colleges and universities grow to like the pleasures of living large. Large sports complexes, star faculty members, big science, and a shimmering image mean a lot to college administrators and a fair number of faculty members too.

We seem to have devised a historical trap for ourselves. Most Americans believe a college degree is a prerequisite for a prosperous life; most accept that college is inherently expensive; most are grateful for the assistance that the federal government offers in meeting this huge financial burden; and most take a vicarious pleasure in the very institutional vanity that drives the price of college ever higher. Is there a way out of these mutually-reinforcing assumptions?

I don’t expect politicians like Senator Kerry and lobbies like ACE to break the cycle; nor do I think many parents are likely to forego sending their kids to expensive colleges and universities on the gamble that they will thrive without the college degree. There is some possibility that the current demographic bulge making this a fat time for college admissions officers is due for a steep fall off in 2014. If you can wait that long, market forces should have some effect on college prices.

But maybe we have just decided that high prices for a college education are a good way to organize our society. Those prices are high enough to discourage large families and to provide a strong incentive for both parents to work. They also force a lot of people to work more years before retirement, and they amount to an early form of inheritance for children. Anything parents spend today on college bills will be subtracted tomorrow (along with interest) from the last will and testament. Never mind the old inheritance tax; college tuition is its functional equivalent.

Somehow I doubt that we have reached these choices deliberately. They seem rather more like unintended consequences of an initially good idea. The G.I. Bill, perhaps the last gasp of the New Deal, turned out to be also the first breath of the Big Steal.

Peter Wood, a professor of anthropology at Boston University, is the author of Diversity: The Invention of A Concept.

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