New Report: “Investing in America’s Future”

Student Aid and College Access Linked to National Interests

As Growth of Low-Income Students & Declining Aid Threaten Crisis

• Report Documents Dramatic National Dividends from College Investments: Increasing Tax Revenues; Decreasing Reliance on Public Assistance; Lower Unemployment Rates; Decreasing Crime Rates; Increasing Health Quality/Life Expectancy; Increasing Civic Participation
• College Cost Burden Rests on Today’s Low-Income Students
• Urgent Call to Double Pell Grant Maximums and Fully Fund the Program

Washington, D.C., April 30, 2004—A new national report documents widespread and dramatic benefits to the nation from investing in higher education and the critical role played by student aid. But the study also warns that current levels of need-based student aid may be inadequate to prevent a crisis in access and affordability among the rapidly increasing numbers of college-qualified, low-income and minority high school students. The failure to improve equity in college access through grants and scholarships, the study concludes, will have damaging national impacts. Grant aid, says the report, represents the “most powerful impact on college access.”

The national benefits linked to investing in student aid and college access, according to the report, include: higher tax revenues; lower unemployment; greater productivity; reduced reliance on public assistance; increased consumption; increased civic participation; decreased crime; and increased quality of health, civic life, and social cohesion. College graduates, for example, had a 2.9% unemployment rate in January, 2004, compared to 4.9% for those with a high school diploma and 8.8% for those without a diploma. Also, in the year 2000 national elections, 77% of Americans with a college degree voted, compared to 54% of high school grads and only 38% of those with no high school diploma.

The study, Investing in America’s Future: Why Student Aid Pays Off for Society and Individuals, an analysis of existing research and new findings, is being released jointly by the Institute for Higher Education Policy, a non-profit, non-partisan research organization, and by Scholarship America, the nation’s largest private sector scholarship and education support organization. Officials will present the report on Friday, April 30, at the National Scholarship Month Kickoff at 10 a.m. at the National Press Club in Washington, DC. The National Press Club event includes a panel of media representatives who will comment on the report. Scholarship America® President Bill Nelsen, USA Funds® President Carl Dalstrom, and Institute President Jamie Merisotis will lead the discussion.

Three decades of declining federal grant levels and decreasing state funding for colleges and universities, the study reports, have dramatically shifted the burden of rising college costs to students and their families, especially at lower-income levels. The percentage of family income required to pay for one year of college almost doubled for low-income families—from 13 to 25%—between 1987 and 2001. High-income families consistently spend less than 5% of their income.

In three decades, need-based grant aid has plunged from 61% of the share of federal student aid to 22% today, while loans have soared from 34% to70%. Pell Grants now pay for only about 34% of the average cost of attendance, down from 84% in the mid-1970s.

This dramatic shift in the burden of college costs, along with a growing percentage of low-income students expected to attend college in this decade, threatens to widen the disparities in college access and lead to nationwide consequences. The gaps in college-going rates between low and high income students have remained significant and virtually unchanged in the last 20 years, with only 48% of low-income students entering college today, compared to 77% of high-income students. By under-investing in college access, the report cites, these gaps are likely to widen.

“We are losing the battle to achieve equity in college access in this nation,” said Jamie Merisotis, President of the Institute for Higher Education Policy. “The price for that failure will go far beyond denying individual opportunities, to a wide range of damaging consequences to the nation’s economic stability and soundness, productivity, crime levels, and social cohesion. A greater proportion of financial aid must be awarded on the basis of need, and in the form of the most effective tool we have for college access—grant aid.”

Among public investments in higher education, the report states, need-based grant aid is the “most efficient use of taxpayers’ dollars.” Grants maximize the nation’s return on investment because grants usually make the critical difference to achieving college access among an increasing number and proportion of students, and because closing the ‘college access gap’ has nationwide implications.

Report Recommendations:

• Double the Maximum Federal Pell Grant Award and Fully Fund the Program. Restore the program’s lost purchasing power and pay for an average of 75% of the price of attending a public four-year college, significantly reducing the burden on low-income students.
• Refocus State Student Aid Dollars on Need-Based Grants, reversing the trend of awarding student aid based on academic merit alone, which has reduced funds for low-income and minority students.
• Acknowledge the Private Sector as a Full Partner in the College Financing Equation, Particularly Through Scholarship Aid. Scholarship aid can bridge a vital gap of unmet need after federal, state, and institutional financial aid is applied. Also, more corporations should consider providing tuition reimbursement plans and other support for employees as a minimum investment for the future.