Breaking the chicken-or-egg cycle in American higher education

Breaking the chicken-or-egg cycle in American higher education

US higher education institutions face ongoing criticism from journalists, policymakers, academics, families, and students for inadequately supporting socioeconomic mobility. (I also have contributed to this critique for more than two decades.) Evidence shows that earning a bachelor’s degree increases lifetime earnings by more than 60 percent on average. Despite this, overall educational attainment lags behind and access to university remains uneven. Will 2022 be the year we see remarkable progress? I want to be optimistic, but I resist given the chicken-or-egg dilemma facing American higher education.

The problem is that while there are changes that colleges and universities could implement to improve educational opportunities for low- and middle-income families, growing income inequality, dating back to the 1970s, actually makes it increasingly harder to do it. To put it bluntly: Universities must commit more money to educate a growing proportion of low- and middle-income students at a time when fewer of their students can afford tuition. This has the perverse consequence of driving colleges and universities to spend more to attract those who are willing and able to foot the bill. Every dollar spent on financial aid cannot be spent on the items that normally attract those high-income students, and vice versa. Rising income inequality leads to increased tuition, costs, and the need for financial aid at colleges and universities, making it harder for them to educate more low- and middle-income students.

We can no longer allow this to continue. We are failing our citizens. Even as the rich have gotten richer in our country (and this includes our best-endowed institutions), we have made very little headway. The 60 colleges and universities with the largest endowments have only slightly increased the percentage of Pell recipients they serve, from 17 percent of students who entered in 2009-10 to 18 percent in 2019-20. The top ten institutions fared better in that time period, but only at the level of other highly endowed colleges and universities. In that ten-year period, endowments have nearly doubled, and that doesn’t take into account the phenomenal returns this past year — about 50 percent in some cases. Even for the less affluent institutions, which collectively educate the vast majority of students, the situation is no less worrying. While they are enrolling significantly higher proportions of Pell-eligible students, graduation rates are suboptimal.

Breaking the cycle presents challenges, but through the right policies and incentives these can be overcome. We must reduce income inequality and encourage higher education institutions to enroll more low- and middle-income students more quickly.

When I examined the impact of rising income inequality between 1971 and 2009 on rising tuition, costs, and financial aid at a set of better-endowed colleges and universities (those with the financial resources to address affordability and access issues, as well as student success), I found that the government was in the best position to directly address growing income inequality and also to change the incentives facing higher education. Indeed, without government action, such as linking funds to social mobility contributions, colleges and universities face financial disincentives to change their behavior and thus will accomplish little on their own.

Since then, we have seen some attempts at cooperation within the sector. The American Talent Initiative (ATI) points in that direction. ATI members are working together toward the collective goal of attracting, educating, and graduating an additional 50,000 talented low- and middle-income students at the nation’s best colleges and universities by 2025. Other collaborations, such as the Association of Public and Land -grant Universities Powered by Publics, are bringing institutions together to address issues such as affordability and meeting basic needs.

But even if these attempts are encouraging, I doubt we’ll turn the tide without government incentives. We must change the financial incentives facing colleges and universities so that everyone finds additional reasons to increase their commitment to socioeconomic diversity. The government could require a minimum Pell threshold for institutions to be eligible for student financial aid or offer an endowment tax credit for those that meet Pell thresholds, such as two examples. These measures could work alongside increased funding to help students attend college, whether in the form of increased Pell grants, tuition-free community colleges, increased funding for HBCUs, or higher education scholarships for national service.

The time to act is now. Every day that the cycle of the chicken or the egg continues, it becomes more difficult to correct. If America wants to build back better, we must reduce the income gap that persists, putting low- and middle-income families in a better position to invest in their children’s education. We must recognize that higher education institutions, with the right incentives, can also play a critical role in achieving this. What better time for the colleges and universities with the most resources in the last decade to step up and do more to contribute to the public good.

Catharine B. Hill is CEO of Ithaka S+R and President Emeritus of Vassar College.

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