Looking Ahead at Economic Considerations

The burden of funding higher education has been shifting for some time from government sources to students. This trend is reflected by significant tuition increases at public colleges and universities across the nation. Parents of young children are frightened by predictions of what going to college will cost when their children are old enough to attend. Commercials on television suggest that families start to save money for college as soon as a child is born. This advice is based on economic projections that, when today’s infants are ready for higher education in 2022, the total tuition covering four years at a state university may be $50,000 or more. The current average tuition over four years is $20,000 at public institutions and as much as $120,000 at elite private universities (Arenson 1997; Trombley 2003).

The first state to offer a prepayment plan to residents was Michigan in 1986. The details of these programs vary by state but commonly lock in future tuition at current rates so families will be protected from escalating costs. This approach is referred to as a Guaranteed Education Tuition (GET) plan. Assume that the parents of an infant pay $5,000 this year for their child's future tuition as a college freshman. The couple submits the same amount during each of the next three years for a total investment of $20,000. The combined prepayments cover tuition costs, thereby avoiding possibly overwhelming expenses without the plan in 2022. Parents of students in elementary grades or middle school can also join but must pay a higher amount because their child will start college sooner. Prepayments are put into a government trust and invested with a guarantee to pay four years of tuition at any of the public universities or colleges in the state. If a student is unable to meet academic requirements for admission or chooses to attend a school in another state, a refund will be provided with some interest penalty.

One assumption of prepayment plans has been that interest rates and college tuition would rise at a corresponding pace. However, lower interest rates but higher tuition has been the rule in recent years. A national slowdown in the economy after the tragedy of 9/11 caused legislatures in most states to reduce the funding level they contribute to the operation of colleges and universities. Institutions have responded by increasing tuition; even with high rates, the tuition students pay accounts for usually only one-fourth the total cost of their education. Some states have temporarily denied further membership in prepayment plans; others are restructuring the plan so parent contributions will be tied to growing tuition; and still others have initiated deliberations over whether the legislature should assume responsibility to meet whatever shortfalls occur between the amount parents have paid and what tuition ultimately will cost when the child goes to college. The National Association of Student Financial Aid Administrators Web site describes the plans in place for each state along with contact information -- http://www.nasfaa.org/annual/pubs/csp0202.asp

Congress passed the Economic Growth and Tax Relief Reconciliation Act in 2001. This legislation enlarged the tax advantage for families to set aside money for tuition and approved a more versatile strategy to augment the prepayment options. Known as the 529 College Savings Plans, these alternatives do not lock in rates of tuition nor do they offer other guarantees. Investments depend on market condition risks so profits may not cover all college costs. However, this option has no maximum annual amount for the contribution and compounds interest tax-free so it can grow more rapidly. There are appealing features at the time the money is taken out as well. So long as the funds are applied for education purposes, earnings on the investment remain tax-free. The money may also be used to attend universities elsewhere than in the sponsoring state. Forecasts suggest that more than $15 billion will be invested in prepayment plans or the 529 college savings plans by 2010. One downside of 529 plans is that management fees can be high and certain states do not offer tax deductions (Tergesen, 2003). The College Savings Plan Network, an affiliate of the National State Treasurers, maintains a Web site which describes the options available in every state at http://www.collegesavings.org (click the link ‘Guide to Understanding 529 plans’).

The Gender Gap

Before 1980 more men than women went to college. The assumption then was that continued efforts to bring equity would result in as many female students as males. The surprise was that, while enrollment rates for women have risen steadily in the past decade, the number of men attending college has declined. Consequently, men now represent 44% of undergraduates nationwide with an expectation of further shrinkage by 2010 (Rowan 2002). Women earn 57% of bachelor degrees and 58% of masters’ degrees. The higher proportion of degrees currently completed by women than men are spread across ethnic groups to include Whites (58%), Blacks (63%), Hispanics (61%), Asians (55%), and Native Americans (62%) (National Center for Education Statistics 2002).

One possible explanation for the gender reversal in enrollment is that men are more likely than women to seek employment in the high tech sector where a degree is less often necessary and pay is greater. These jobs represent only 9% of the labor force. Another speculation is that a larger proportion of men, especially from low-income backgrounds, choose to go directly from high school to a trade such as telephone repair, aircraft mechanic, and related fields where the income is good after short-term training. This means there is no need to delay marriage or assume the financial debt usually associated with four or more years of college. Whether efforts should be made to recruit more men for college and how to proceed with such a task has yet to become a public concern (Conlin 2003; Fonda 2000).

Everyone Needs Job Training

The new economy has made prosperity more dependent on educational attainment. Demands for highly skilled employees are expected to accelerate, and the proportion of jobs that require training beyond high school continues to rise. Some estimates are that 70% of jobs will require post-secondary education (Carnevale 2002; Freeman 2003). However, this does not mean that every student should go to college. Many adolescents and their parents erroneously suppose the choice must be between college or settling for a service-related job that offers a poor economic outlook. These perceptions do not match current conditions or forecasts. Indeed, 43% of bachelor degree graduates have jobs for which they are overqualified (Lee 2000). It seems that expectations students have as to where a college degree will take them are alarmingly naïve (Johnson and Duffett 2003).

Meanwhile, hundreds of thousands of jobs that pay well but require different skills and credentials remain unfilled. According to the United States Department of Labor (2002), half of the new jobs created by 2010 will be available to students who enroll in short-term to moderate length training following high school. The situation is complicated by a general belief that, because most high school students express the goal of attending college, the guidance they need to choose their career can be postponed. This conclusion fails to acknowledge that high schools also are obliged to provide vocational guidance for students who are not planning to go to college. For these individuals, career exploration must occur while they are still in high school or it might not happen at all (Gordon 2000).

Relevance of Core Curriculum

The curriculum of American high schools is most helpful in support of general reasoning abilities. However, the core curriculum seems a poor match for current expectations of employers. Anthony Carnevale (1999; 2002), labor economist and Vice President for Education and Careers at the Educational Testing Service, estimates that at most only 13% of workers will ever need to use algebra on the job even though two-thirds of high school students are led to believe that their occupational future depends on performing well in algebra. Dennis Redovich (2000), Director of the Center for Study of Jobs and Education, presents a related challenge to the common practice of requiring all students to pass tests on mathematics skills that are unnecessary for employment. His job projections through 2006 led Redovich to conclude that high stakes testing in mathematics is a hoax that should be exposed and eliminated.

Support for high stakes testing as essential for all students appears to be eroding, even in terms of taking the results of tests seriously. Over half of the high school freshmen and sophomores who completed the 2003 New York Board of Regents mathematics examination failed. Officials at the New York State Department of Education initially interpreted these results to mean that test items were too difficult. Later, the scores of students who failed were adjusted to reflect what they would have meant on a previous version of the test administered one year earlier. Using a revised scoring chart, 19% more of the failing 9th graders and 27% more of the failing sophomores were then identified as having passed the examination (New York State Department of Education, 2003).

Richard Freeman (2003) of the Harvard University Center for Economic Performance offered a reminder of the disappointing consequences that can occur when greater demands for certain skills are alleged than are actually needed. In 1987 the National Science Foundation predicted that, by 2006, there would be a shortage of 675,000 scientists. These ominous figures were used to convince Congress that the anticipated scarcity had to be met or the country would lose its competitive edge. The solution proposed by Erich Bloch, Director of the National Science Foundation, was to increase the agency’s budget and recruit greater numbers of students for science. In 1992 Congressional hearings were convened again, this time to focus on the glut of young scientists who were having trouble finding jobs in fields where large-scale shortages had been forecast. Internal documents from the agency were made public revealing that staff had identified errors in the projections and made them known. However, the leaders chose to ignore this evidence (Mervis 1992).

The skills students will actually need following graduation from high school should be acknowledged by boards of education and used to make changes in the required core curriculum (Ohanian 2003). In testimony before the Select Committee on Education and Workforce of the United States Congress, Frank Newman (2003) from the Brown University Futures Project recommended that educators be urged to prepare students for key skills identified by the Business-Higher Education Forum that are typically lacking among new workers. These competencies include computer literacy, teamwork skills, problem solving abilities, time management, adaptability, analytic thinking, self-management, and global consciousness.

Finding a Career Path

High school counselors devote considerable time to college-bound students and individuals who present discipline problems, or suffer from crises such as drug abuse (Boesel and Fredland 1999; Wagner 2003). In most high schools the ratio is one guidance counselor to 600 students. Therefore, it should not be surprising that adolescents who prefer to learn about vocational training continue to be ignored in the same way they were in the past (Grevelle 1999; Lynch 2000). Families are bombarded by reports on rising costs of college but rarely receive information about tuition rates at vocational and technical schools. High schools should help parents become aware of these tuition rates, length of courses at trade schools, average salaries of graduates on completion of studies, and placement service success by the institutions. For example, DeVry Institute of Technology reported that 96% of graduates are employed in their chosen field within twelve months after completing a program (Hodges 1999).

Guidance that centers exclusively on the college bound students without equal consideration for those who are interested in vocational training is occupational discrimination and should not be tolerated (Boesel and Fredland 1999). This was the conclusion reached by the United States Congress when it enacted legislation during 1998 to implement new reforms in support of vocational/technical education including an identity change for these programs. Tech Prep is the new term (Grevelle 1999; Lynch 2000). Students and their parents can benefit from learning how expectations of employers are changing and how emerging job opportunities should affect preparation for the workplace.

In this connection, Otto (2001) examined the perceptions of adolescents about parent influence on their career path. The sample of 350 high school juniors were asked to identify persons they spoke with about occupational plans. Mothers were identified by 81% of students, followed by peers (80%), and fathers (62%). Mothers as the preferred source for guidance were reported by both genders and across ethnic groups. Although a much greater proportion of fathers were employed than mothers, students felt that their mothers were better acquainted with their interests and abilities.

Adolescents may look to mothers for answers about careers but the mothers are keenly aware of their own lack of knowledge in this realm. Studies of 739 White, Black and Hispanic mothers of adolescents considered self-perceptions of parenting assets and limitations (Strom, P., Van Marche, Beckert, Strom, Strom, and Griswold 2003; Strom, R., Dohrmann, Strom, Griswold, Beckert, Strom, Moore, and Nakagawa 2002). Mothers ranked “I need more information about helping my child explore careers” as their second greatest need out of 60 items. Career exploration should be included as a focus for educational programs that serve parents of high school students.

Another way to acquaint students with career opportunities calling for post high school training but not a college degree is to arrange interviews with skilled trade workers. This strategy can provide information needed to make decisions about specific occupations, required skills, and satisfactions as well as limitations in the marketplace. Interaction with workers allows students to express personal goals and get feedback on whether the perceptions they have about careers match the reality as experienced by persons employed in the field.

Entitlement and Demographic Implications

Should college and vocational training become an entitlement for students graduating from high school? Middle school and high school teachers can ignore this question by claiming that learning which occurs after their own involvement should be the obligation of other educators. A more constructive perspective is for schools to help parents of adolescents begin to think about and structure the debate for which they will likely assume leadership. Recognizing why this controversy is imminent can enable faculty of secondary schools to choose the role that is best for them.

Saving money for college is a reasonable expectation for affluent families. However, half of all students who graduated from high school in 2004 were from low-income households. The cohort of young adults (ages 18 to 24) is forecast to increase each year during this decade, culminating in the largest high school graduating class in the nation’s history in 2009. These students are concentrated in the western and southern states where poverty rates are greatest. Higher Hispanic birth rates means they will account for two-thirds of population growth among 18-24 year olds (Callen 2003; Gonzales 2001).

African Americans have nearly caught up with Whites in high school graduation rates (see Figure 1). The comparative rates are 87% for Blacks, 93% for Whites, and 63% for Hispanics (National Center for Education Statistics 2002). There must be other options for these students than just college prepayment plans, 529 college savings options, tax shelters, income tax deductions, or enlistment in the military to obtain veterans benefits for attending college. Efforts to increase high school student graduation rates should be joined by initiatives to ensure that college students graduate in greater proportions as well. Figure 1 shows that the percentage of 25- to 29-year-olds who have earned a bachelor’s degree or higher, by race and ethnicity, is 33% among Whites, 18% for Blacks and 11% for Hispanics.

Tuition Increases and Financial Aid

Tuition at public institutions has increased 80% in the past twenty years, twice the rate of increase in family earning power. If this trend continues, part time employment may not produce sufficient income for students working their way through college. Nearly 55% of college students work part-time or full-time, leading many of them to carry greater numbers of credits than can be well managed. The balancing act usually means too little time is spent on studying and consequently learning is compromised. This problem is widespread but usually more acute among low income and minority students (Immerwahr 2003).

Figure 1

Students generally take out loans and, on average, will owe $17,000 when they finish a bachelor’s degree (Monks 2001). Congress has approved increased tax credits and repayment options to partially offset the financial burden and allow students to pay back college loans over a longer timeframe (up to 25 years). Extending the period of payment substantially increases the amount of total interest. Some people will still be paying off school debts well into middle age while older students could be paying after retirement (Fossey 1998).

When student aid programs were introduced on a large scale during the 1970s, federal assistance was primarily intended for low-income students to attend college. Since then, tuition rates have doubled causing lawmakers to consider new ways for making college affordable for middle-class families as well. For example, in 1997, President Clinton established a Hope Scholarship Program offering $3000 in tax credits for two years of college. The goal was to give college opportunities for a new generation. However, because the poorest among families pay no federal income tax, they get no assistance in this particular program. Instead, Hope tax credits are limited to those students whose parents have annual incomes from $30,000 to $90,000 per year, the group that would likely have made college available anyway. There are notable exceptions like the state of Georgia where money generated by the state lottery is set aside for college tuition of students who graduate from high school with a B average (Callen 2003).

The result of financial aid packages and incentives favoring affluent students is a growing gap in which applicants from the wealthiest quartile are seven times more likely to get a degree than peers from low-income households (Macy, 2000). This inequity will likely grow because the college population is predicted to increase from 13 million students in 2003 to 21million by 2015. Unlike prior generations, 85% of this increase will consist of minorities and 41% will be from low-income families. These are the groups that generally have experienced difficulties going to college. Looking ahead to the end of this decade, the Congressional Advisory Committee on Student Financial Assistance estimated that lack of funds will prevent 4.4 million qualified high school graduates from entering a four-year college and 2 million more from enrolling in a two-year community college (Reed, 2004).

Support for and Opposition to Entitlement

More lengthy schooling is becoming the norm. To properly prepare for a career, adolescents need greater learning than is provided by the elementary and high school curriculum. If students cannot pay for the further education they need to meet entry-level requirements of employers, the future is bleak for them. This situation could adversely affect their financial ability to support themselves and their families. The American concept of equal educational opportunity is jeopardized unless post secondary tuition costs are underwritten by society. This reform will be supported as reasonable by a significant segment of the public and opposed by a large population as well.

Many economists view the growing income gap between poor and affluent as the greatest social problem and agree that equal access to higher education could be the best solution (Bernstein 1999; McPherson and Shapiro 1997). There is a range of imagined outcomes that could occur if higher education were to become an entitlement. For students who come from low income families, this unprecedented reform may create a broader sense of hope, perhaps increase motivation to learn, improve attention in class and levels of achievement, reduce the rate of disruptive behavior, diminish the appeal of gangs, and implement the opportunity for equity our nation has promised itself. Middle-income families would not have to set aside money for many years to cover expenses of higher education. In turn, this would reduce parents’ need to borrow and instead allow them to save for their retirement. Students could spend less time employed and devote greater attention to study. This would help them gain the skills needed for their occupation, enter the work force sooner and without debt, and avoid the anxiety associated with subjecting parents to financial sacrifice.

Those who oppose making higher education an entitlement could argue that the nation should retain its tradition of fully funding only the amount of schooling that is compulsory. Others may contend that students are better off when they have to pay for the tuition because this causes them to value their learning more and to study harder. Some critics may want to attach conditions before policy change is approved. For example, they may insist on ending the practice of offering remedial courses in college so persons who have not fully qualified themselves will have to meet entry standards before being allowed to participate in any tuition free program. Some may seek assurances that will prevent state support of persons who want to be perpetual students by placing limits on the number of times a student can change majors or pursue studies in areas where the employment opportunities are negligible.

Other restrictions could call for making the college curriculum more job related and practical, improving the competence of graduates by increasing the number of hours that must be taken to represent a major, and abandoning the practice of requiring a year of general studies before being allowed to study in a chosen field. Still another condition might be that universities would be directed to increase guidance and monitoring by the faculty since studies have consistently shown that nearly half of college freshmen fail to complete a degree in six years (National Center for Education Statistics 2002).

Conclusion

The main concern of parents is no longer whether their children are able to qualify for higher education but how the family will pay for college expenses. Tuition-free education would include vocational training as well as college. Until now there was no compelling reason for parents of minor age children to organize themselves as a political lobbying group. The assumption has been that communities would always assign high priority to ensuring that children are well prepared to enter the world of work. The failure of school bond issues during recent years has caused a growing number of parents to conclude that they may have to mobilize to protect the future of their children (Hewlett and West 1998).

A unified effort by parents would be necessary to override the objections of special interest groups likely to assert that the nation is unable to afford additional entitlements. However, Social Security and Medicare on which a growing number of older adults depend cannot be financially sustained unless younger people have the education they need to perform well in a globally competitive workplace. No one can be sure when the proposed debate will begin on a national scale but we believe the time is soon. In the meanwhile, consider these questions: What are the pros and cons of providing high school graduates with an entitlement to pursue vocational training or a college education? What will be the outcomes of public dialogue on this fundamental reform? When will the disparities of access to higher education be recognized as sufficiently serious to warrant beginning the debate?

References

Arenson, K. 1997, August 31. Why college isn't for everyone. The New York Times, E1, 10.

Bernstein, A. 1999, May 31. What can k.o. inequality? College. Business Week, 68-74.

Boesel, D. and E. Fredland. 1999. College for all? Is there too much emphasis on getting a four year college degree? Washington, DC: United States Department of Education, Office of Educational Research and Improvement, National Library of Education.

Callen, P. 2003. A different kind of recession. National Crosstalk. San Jose, CA: National Center for Public Policy and Higher Education, 2A. Available at: http://www.highereducation.org/reports/affordability_supplement/index.shtml

Carnevale, A. 1999 October. Wanted: Strong thinkers. Scientific American, 89.

Carnevale, A. 2002. Education, training and the American labor movement. Presented at the Annual

Conference on Working for America, 22 April, Philadelphia.

Conlin, M. 2003 May 26. The new gender gap. Business Week, 75-84.

Fonda, D. 2000, December. The male minority. Time, 58-60.

Fossey, R. 1998. Condemning students to debt: Is the college loan program out of control? Phi Delta Kappan, 80(4), 319-321.

Freeman, R. 2003. The world of work in the new millennium. In What the future holds: Insights from social science, eds. R. Cooper and R. Layard, 152-178. Cambridge, MA: The MIT Press.

Gonzales, V. 2001 May. Immigration: Education’s story past, present and future. The College Board Journal, 193, 24-31.

Gordon, E. 2000, July/August. Help wanted: Creating tomorrow’s workforce. The Futurist, 48-52.

Grevelle, J. 1999, April. The next generation of tech prep. The High School Magazine, 6(6), 32-33.

Hewlett, S., and C. West. 1998. The war against parents. Boston: Houghton Mifflin.

Hodges, J. 1999 June 7. If education is supposed to be an investment. Fortune, 240-241.

Immerwahr, J. 2003. With diploma in hand: Hispanic high school seniors talk about their future. San Jose, CA: National Center for Public Policy and Higher Education.

Johnson, J. and A. Duffett. 2003. Where we are now. New York: Public Agenda.

Lee, L. 2000. Success without college. New York: Doubleday.

Lynch, R. 2000. High school career and technical education for the first decade of the 21st century. Journal of Vocational Education Research, 25(2), 155-198.

Macy, B. 2000 August. Encouraging the dream: Lessons learned from first generation college students. The College Board Review, 191, 36-40.

McPherson, M., and M. Shapiro. 1997. Student aid game: Meeting need and rewarding talent in American higher education. Princeton, NJ: Princeton University Press.

Mervis, J. 1992, April 16. NSF Falls short on shortage. Nature, 356(6370), 553.

Monks, J. 2001. Loan burdens and economic outcomes. Economics of Education Review, 20(6), 545-550.

National Association of Student Financial Aid Administrators. 2004. State Plan Summary Chart. Washington, DC: The Association. Available at http://www.nasfaa.org/annual/pubs/csp0202.asp

National Center for Education Statistics. 2002. The conditions of education. Washington, DC: Government Printing Office. Retrieved November 2, 2003 from http://nces.ed.gov/programs/coe/

Newman, F. 2003 May 13. Higher education in the age of accountability. Washington, DC: Testimony before the Committee on Education and Workforce, U.S. Congress.

New York State Education Department, Office of Communications, 2003 August 29. New scoring chart issued for Regents Math A exam. New York: State Education Department.

Ohanion, S. 2003. Capitalism, calculus, and conscience. Phi Delta Kappan, 84 (10), 736-747.

Otto, L. 2001. Youth perspectives on parental career choice. Journal of Career Development, 27(2), 111-118.

Redovich, D. 2000. What is the rationale for requiring higher math for “all”? Greendale, WI: Center for the Study of Jobs and Education in Wisconsin. Available at: http://www.jobseducationwis.org

Reed, A. 2004. Majoring in debt. The Progressive, 68(1), 1-4.

Rowan, M. 2002. The gender gap. The College Board Review, 197, 36-43.

Strom, P., D. Van Marche, T. Beckert, R. Strom, S. Strom, and D. Griswold. 2003. Success of Caucasian mothers in guiding adolescents. Adolescence, 38 (151), 501-518.

Strom, R., J. Dohrmann, P. Strom, D. Griswold, T. Beckert, S. Strom, E. Moore, and K. Nakagawa. 2002. African American mothers of early adolescents: Perceptions of two generations. Youth & Society, 33(3): 394-417.

Tergesen, A. 2003 September 1. Time to rethink the 529. Business Week, 92-93.

Toney, M., and A. Lowe. 2001. Average minority students: A viable recruitment tool. The Journal of College Admission, 171: 10-15.

Trombley, W. 2003. Rising price of higher education. National Crosstalk (supplement), San Jose, CA: National Center Public Policy & Higher Education: 1-12. Retrieved November 2, 2003 from http://www.highereducation.org/reports/affordabilitysupplement/index.shtml

United States Department of Labor. 2002. Fastest growing occupations covered in 2002-2003 Occupational Handbook for 2000-2010. Washington, DC: The Department.

Wagner, W. 2003. Counseling, psychology and children. Upper Saddle River, NJ: Prentice-Hall.

*Copyright © 2004 by Paris Strom and Robert Strom

For permission to use a whole or parts of this paper, write to bob.strom@asu.edu or stromps@auburn.edu