The Widening Income Gap in Higher Education—and What to Do About It

The good news, according to a research report out on Tuesday is that the college-going gap between students from rich and poor families has narrowed somewhat since 1970. The truly devastating news? The gap in bachelor’s completion by family income has roughly doubled in those years. What’s going on? And what can be done to remedy the problem?

The report, “Indicators of Higher Education Equity in the United States: 45 Year Trend Report,” from the Pell Institute for the Study of Opportunity in Higher Education and the University of Pennsylvania’s Alliance for Higher Education and Democracy, begins with the positive news: More students are going to college, and the gap by family income is declining. The share of dependent 18-to-24-year-olds who continue on to college increased from 1970 to 2012 for all income groups—and the gap between the top and bottom income quartiles declined from 46 percentage points to 36.

Despite those modest gains, the authors of the report, Margaret Cahalan and Laura Perna, find that the family-income difference in bachelor’s receipt by age 24 during roughly the same period skyrocketed. In 1970 dependent students from the wealthiest income quartile were 34 percentage points more likely to attain a bachelor’s degree than those from the bottom income quartile (40 percent vs. 6 percent). By 2013 that gap had ballooned to 68 percentage points (77 percent vs. 9 percent).

What was going on during that period that might help explain the widening gap in bachelor’s-degree attainment by income?

There are lots of possibilities. One primary factor is likely to be rising tuition costs coupled with drastic changes in federal and state financial-aid support for students. Whereas the maximum Pell Grant covered 67 percent of the average cost of college in 1975, the maximum Pell covered only 27 percent of the total cost in 2012. States have famously cut back on supporting higher education, with students and parents left holding the bag. In 1977 state and local governments provided 57 percent of higher-education revenue, but that dropped to 39 percent in 2012. Families and students saw their share of revenue provided increase from 33 percent to 49 percent during the same period.

Which families are hurting most? While it is commonly said that when it comes to paying for college, it’s the middle class that is squeezed (because rich kids can be supported by their parents, and poor kids get financial aid), the report shows in fact that poor students are under the most pressure. After counting in the expected family contribution, grants, and loans, students in the lowest family-income quartile had $8,221 in unmet need in 2012—far more than students in any other quartile. That level of unmet need is twice as high as it was in 1990.

A second factor helping to explain the widening income gap in bachelor’s-degree attainment may be a change in the types of institutions that students attend. As The Chronicle noted, a key finding of the report is large-scale economic stratification within higher education. The report finds low-income students are trending toward community and for-profit colleges and wealthier students are congregating at four-year public and nonprofit colleges.

That phenomenon has strengthened over time. In 2001 students receiving Pell Grants were 14 percentage points less likely than non-Pell students to go to a four-year college (as opposed to a two-year college). But by 2012 that gap between Pell and non-Pell students had grown to 20 percentage points. Similarly, the authors find that in 2012 students receiving Pell Grants were three and a half times as likely to attend a for-profit college as non-Pell students were, up from two times as likely in 2001.

This growing stratification within higher education matters because studies find that, when you match students by income, race, and academic preparation, a given student is more likely to receive a bachelor’s degree if she starts at a four-year institution than at a community college. For-profit colleges often produce poor results as well.

What is to be done?

Cahalan’s section of the report outlines 16 smart ideas—from strengthening Pell Grants to enhancing the TRIO student-support programs—but let me highlight two.

First, she supports President Obama’s proposal for free community-college tuition, which I think makes sense for a couple of reasons. For one thing, Obama’s proposal will help low-income students finance their education and spend more time studying and less time working at Walmart. For another, the Obama plan could also have the beneficial effect of drawing more middle-class students to two-year colleges.

As I recently argued in The Atlantic, this could, in turn, strengthen the political capital of community colleges to garner adequate financial resources from which all two-year students would benefit. The 2013 report of a Century Foundation blue-ribbon panel, “Bridging the Higher Education Divide: Strengthening Community Colleges and Restoring the American Dream,” also called for taking steps to reduce socioeconomic and racial stratification between two- and four-year colleges in order to improve education for all students.

Second, Cahalan rightly calls for a return to state investment in public higher education. In Norway, she notes, public universities attended by 85 percent of students charge no tuition. Of course, Norway is a very different country from the United States. But is it really a coincidence that Norway also leads the world in “Type A” degrees (roughly the equivalent of American bachelor’s degrees)?

When low-income American students are one-eighth as likely as rich students to earn a four-year degree by age 24, we are wasting a lot of talent and making a mockery of our commitment to equal opportunity in higher education.

Richard D. Kahlenberg, a senior fellow at the Century Foundation, serves on the advisory board of the Pell Institute for the Study of Opportunity in Higher Education.

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