Shortchanging Students

    A is for aerospace engineering. B is for biologists. C is for classical studies.

    Pat Leung

    And D is for debt. Lots and lots of student debt.

    If the Bush administration’s budget proposal passes, the costs of attending a university for higher education, including UCSD, could increase dramatically in two ways. First, tuition will have to increase to adjust for proposed cuts in higher education spending. Second, it will rise because there will be fewer opportunities for federal financial assistance and limited ability to lock in a lower interest rate on student loans from the government.

    These are the hard truths of slow economies and budget cuts. The nation’s slow economic recovery has forced the Bush administration to make difficult choices — choices that have traded government spending on post-secondary education and financial aid assistance programs for tax cuts to boost consumer spending. The cost of Bush’s plan, intended to fuel an economic rebound, is a budget deficit. Raising interest rates on student loans is one way to compensate for the shortfall in budget needs.

    Couple the House Committee’s plan to fence in assistance for higher education with national trends toward increasing college tuition fees, and a bachelor’s degree becomes out of reach for thousands of students from lower- to middle-class income backgrounds. Given that college graduates can expect on average around $20,000 more per year in income than high school graduates, budget cuts that limit opportunities for students in financial need may reproduce an unequal distribution of income.

    According to the National Center for Public Policy and Higher Education, the costs of attending four-year public and private colleges (including tuition and other education-related expenses) have grown by 7.7 percent and 5.5 percent in 2001, respectively. Both of these growth rates outpaced the growth of family income and increases in inflation, which grew at 2.6 percent in 2001. As a result, the proportion of a family’s income used to pay for tuition and other college expenses has increased.

    Tuition increases disproportionately affect lower- to middle-income students. A report by Senate and House Democrats estimated that rising costs of tuition and debt could “”close the doors of college to 110,000 students.”” This report also calculated that the proposed budget would reduce the number of low-income financial aid recipients by 375,000 students.

    In 1980, tuition at public four-year colleges and universities represented 13 percent of annual income for families from the lowest income bracket. In 2000, with higher costs of debt and increases in tuition costs, spending on college tuition grew to be 25 percent of their income. By contrast, the cost of higher education for students from the wealthiest income bracket remained unchanged between 1980 to 2000, representing only 2 percent of the family income.

    Bush’s budget cuts only exacerbate this inequality.

    To add insult to injury, increases in college tuition rates have outpaced the growth of financial aid granted on a financial need basis, while there has been an increase in programs for students without financial need. According the National Center for Public Policy and Higher Education, in 1981, 91 percent of state financial aid was allocated on the basis of need or a combination of need and academic qualifications. In 1999, only 78 percent of state aid took need into account.

    Tuition increases translate, for many students, into the need to assume higher levels of debt, regardless of the cost of borrowing. The National Center for Public Policy and Higher Education compared the percentage of loans to government grants in 1981 to that in 2000. In 1981, loans accounted for 45 percent and grants for 52 percent of federal student financial aid. In 2000, loans represented 58 percent of federal student financial aid, and grants represented only 41 percent.

    The State Public Interest Research Group issued a report that estimated the average student debt to have doubled from student debt levels in 1994 — to $16,928. The PIRG report warned that this level of student debt is “”unmanageable.””

    The passage of the budget proposal would only perpetuate this trend toward greater student debt. Due to federal budget cuts, students eligible for the Federal Pell Grant — the nation’s largest need-based financial aid program for college students, which issues aid that the student does not need to repay — are likely to see the maximum reward of $4,000 decline.

    The effect of the House committee’s 2003 budget proposal on students financing their college education with either a Direct Loan (a loan awarded on the basis of need for which one is not charged interest until one begins repayment) or a FFEL Stafford Loan (federal loans awarded regardless of need) will be larger.

    Because new legislation will limit opportunities to consolidate loans and secure a lower interest rate, the average student bearing $20,000 in debt can expect to pay $5,300 more in interest over a 20-year period.

    These costs will provide disincentives for students to pursue paths of higher learning.

    The cost to society of students opting out of post-secondary education due to lack of finances or ability to cover the rising costs of debt obligations is a cost that the Bush administration should not ignore.

    Federal and state governments historically have worked in conjunction to provide most of the aid required to help meritorious students who are unable to afford college otherwise. It could be detrimental to the future health of the United States and could handicap state budgets if the federal government shifted too much of this responsibility to the states.

    One benefit of a higher percentage of the population continuing post-secondary education is a more efficient flow of information among its members and thus a higher aggregate productivity level.

    The accumulation of debt could also negatively impact students’ ability to purchase a house or provide for their own children’s education.

    Nationwide, states have planned to slash budgets by $5.5 billion over the next two years, and their public institutions of higher education have continued to raise tuition fees.

    By contrast, California, and its University of California, California State University and California community colleges have been the exceptions to these trends. In terms of higher education affordability, California was ranked among the highest in the nation, receiving a grade of an “”A”” from the National Center for Public Policy and Higher Education.

    According to Gov. Gray Davis’ 2002-2003 Higher Education budget summary, CSU and UC tuition and fees have not been raised in the past seven years, and no tuition fee increase has been proposed for the 2002-2003 school year.

    Furthermore, California provides financial aid for higher education to all students, based both on merit and financial need, through CalGrants A, B and C. The January budget proposal for 2002-2003 proposed an increase of 28 percent in total funding levels for financial aid.

    Universities have historically raised tuition fees during periods of economic hardship, and the systems of higher education in California are certainly not immune to economic forces.

    Cracks in the armor are already apparent: In the May revision of the California 2002-2003 budget proposal, Davis reduced UC research programs by 10 percent and K-12 outreach programs by $28.4 million to adjust for a nearly $24 billion budget shortfall.

    However, California and its systems of higher education have retained their commitment to stable tuition costs, which is critical to making higher education accessible to students of all economic backgrounds without the burden of unmanageable student loans.

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