Higher Education and the Opportunity Gap
By: Isabel V. Sawhill
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Print America faces an opportunity gap. Those born in the bottom ranks have difficulty moving up. Although the United States has long thought of itself as a meritocracy, a place where anyone who gets an education and works hard can make it, the facts tell a somewhat different story. Children born into the top fifth of the income distribution have about twice as much of a chance of becoming middle class or better in their adult years as those born into the bottom fifth (Isaacs, Sawhill, & Haskins, 2008). One way that lower-income children can beat the odds is by getting a college degree. Those who complete four-year degrees have a much better chance of becoming middle class than those who don’t — although still not as good of a chance as their more affluent peers. But the even bigger problem is that few actually manage to get the degree. Moreover, the link between parental income and college-going has increased in recent decades (Bailey & Dynarski, 2011). In short, higher education is not the kind of mobility-enhancing vehicle that it could be.
The obvious solution would seem to be this: First, encourage more low-income children to go to college; and second, finance their education in order to narrow the opportunity gap — a strategy that policymakers have been pursuing for the past few decades. This prescription is fine as far as it goes, and indeed some success has been achieved in both motivating the less advantaged to aspire to college and in providing the financial assistance enabling them to do so. Most high school graduates say that they plan on getting a degree, and spending on Pell grants has risen sharply in recent years, even as deficits have constrained other types of spending (U.S. Department of Treasury, 2012).
The flaw in this simple argument is that the primary problem is no longer enrollment, it is completion. Almost half of all college students and much higher proportions of poor and minority students drop out before they complete a degree. Community colleges, the sector that enrolls the majority of less advantaged and older students, have experienced staggering dropout rates. About 54% of their students don’t complete a degree, receive a certificate, or transfer to a four-year institution within six years (NCES, 2011).
The reasons for lack of completion are many, including rising tuition costs that have only partially been offset by increased government aid and are especially burdensome for the least well off; a lack of information about what aid is available, particularly at more selective schools; and the demands of work and family that may make full-time attendance difficult or impossible. But probably the most important factor explaining lack of completion is inadequate preparation for college in the K–12 years. According to the 2009 National Assessment of Educational Progress (NAEP), only a small fraction of high school seniors are at or above proficiency in math and reading: 26% and 38%, respectively (U.S. Department of Education, 2009). Yet roughly two-thirds of high school graduates enroll in college.
This lack of preparation is not the fault of institutions of higher education. Most colleges, especially the less selective schools at the community college level, have poured time and money into providing remedial courses to help underprepared students succeed, but the effort has done little to overcome the dropout problem. There have also been experiments with providing community college students with various supports such as counseling, the creation of “learning communities” that keep students together for mutual support, or providing extra financial resources to help meet living costs. However, these programs are costly and have had only modest success (Bettinger, Boatman, & Long, 2013).
It is not as if the incentives for completion don’t exist. The wage premium for a college degree has skyrocketed in recent decades, nearly doubling since 1980. When compared to simply graduating from high school, a bachelor’s degree produces an increase in earnings over one’s career of nearly $600,000, even after accounting for the fact that college graduates tend to be more able than noncollege graduates for reasons that have nothing to do with going to college. An associate degree produces a smaller, but still highly significant gain.
It is clear that different segments of the high school population need different postsecondary opportunities. Some are academically able and should be applying to selective schools. Others are much less well prepared and might benefit more from a one-year certificate in a high-demand field such as health, computers, or welding. One size doesn’t fit all.
A more academic literature has shown that there is a small but significant number of low-income, high-achieving students who do not apply to more selective schools but instead enter the community college system or other less selective institutions where they are less likely to graduate. They are often unaware of the fact that many top-tier universities are seeking a more diverse student body and would provide generous financial aid enabling them to attend. Although there are far more high achievers from wealthier families than among those who are less well off, this “undermatching” of talent with available resources is another indicator that class matters in the U.S. (Hoxby & Avery, 2013; Bowen, Chingos, & McPherson, 2009).
At the other end of the spectrum are a large number of high school students who are simply not prepared for the rigors of college-level work. In an earlier paper, co-authored with Stephanie Owen and entitled “Should Everyone Go to College?” we argued that a college degree is a very good investment, on average, but not for every high school student. The benefits depend not only on whether one completes a degree or certificate, but also on the selectivity of the school, the student’s major, and the type of occupation in which she ends up. For example, the rate of return on a bachelor’s degree from a noncompetitive four-year private institution is under 6% while the rate of return on a bachelor’s degree at our most competitive public institutions is over 12%. The difference in lifetime earnings between someone majoring in engineering vs. someone majoring in the arts is a whopping $1.5 million.
Of course, the value of a college degree should not be measured solely in terms of the payoff in the labor market. Higher education creates more informed citizens, better health, better parents, more job satisfaction, and other noneconomic benefits. Still, students would do well to carefully consider their objectives and expectations before choosing an institution or a major. Efforts to make more information available and to help high school graduates and their parents navigate the complexity of the financial aid system — as well as the multitude of institutional choices available to them — should be increased.
More fundamentally, for a lower-income family, higher education is simply not affordable without heavy subsidies from the government or scholarship aid. Faced with messages that a college degree is the ticket to the middle class, and tuition levels that are beyond their reach, borrowing by students and their families has soared. In part this reflects an increase in the number of borrowers (Greenstone & Looney, 2013). But the levels of debt are both worrisome and inconsistent with the idea that higher education should be accessible to all those able to benefit from it.
In the meantime, the federal government is spending $136 billion a year on Pell grants, student loans, tax credits, and other forms of assistance for undergraduate students. While Pell grants are aimed at providing help to low-income students, loans and tax credits are heavily tilted toward middle-class families (Dynarski & Scott-Clayton, 2013). Some reallocation of funding from the middle class to the poor would probably help to close the opportunity gap. But more money for Pell grants, by itself, will not solve the dropout problem. There is no evidence that Pell grants have increased graduation rates, as opposed to enrollments. A higher level of assistance for low-income students but one also tied more closely to performance might help to level the playing field in a more cost-effective way while simultaneously providing stronger incentives for better preparation at the K–12 level. For example, West Virginia’s PROMISE scholarships provide free tuition and fees for up to four years to academically qualified students who maintain a minimum GPA and course load in college. Research has shown that the program increased on-time graduation rates by 7 percentage points (Dynarski & Scott-Clayton, 2013).
More controversially, it may be time to consider an approach that is common in European and Asian countries. These countries require students to demonstrate that they are prepared before they are admitted to a university, using national testing systems. Some countries, such as Germany, also provide far more opportunities for nonuniversity bound students to acquire valuable skills. For those with the requisite ability, the cost of higher education is free or highly subsidized. These systems provide an incentive for students to study hard in secondary school and for the schools to work hard to prepare them for the rigors of college-level work. Universities can then concentrate on educating those most able to benefit, and taxpayers don’t end up subsidizing students to learn in college what they should have learned earlier in their school careers. The European and Asian systems are often more meritocratic than the U.S. system and far more cost-effective from a societal perspective (NCES, 2013).
With the advent of the Common Core standards, a version of this approach could be gradually introduced in the U.S. and financial assistance tied more strongly to performance in high school and college. Because of our tradition of not tracking students and of providing open access to community colleges, and because it would take time for the K–12 system as well as individuals to respond to new incentives, any such modifications would need to be introduced very slowly, and careful attention would need to be paid to how performance is measured.
Even then, critics will charge that such a system would limit access to higher education. They would note that even a year or two of college that ends with the student dropping out has some value in the labor market. They would also argue that access is critical and that our system with its great diversity of institutions from open-access community colleges to elite private schools is designed to promote choice and opportunity. That said, the U.S. is falling behind in international rankings of what students know and how many graduate from college, and it is not clear that we can continue to compete using our current “open-access” model. European countries spend far less per capita on higher education than does the U.S. but get a much greater bang for the buck in terms of college completion rates. To those who worry that this is because they only educate a select few, it is worth pointing out that European levels of income inequality and social mobility compare favorably with those in the U.S.
There is no question that the workforce of the future will need more education, but some of that education may be more effectively provided in high school, in career and technical education programs customized to provide the skills that employers need, and through inexpensive online learning rather than in traditional college classrooms. Community colleges are, of course, providing a great deal of career and technical education, and especially where that education leads to a certification or skill with value in the market place (nursing is a good example), they are providing a vitally important service and deserve more resources for this purpose.
Over the longer term, the focus needs to be on improved productivity in the higher education system. There is a burgeoning interest in online learning combined with more personalized approaches in the classroom. Real innovation and more cost-effective forms of education will require measuring what students learn and not just counting credit hours accumulated. These kinds of innovations will remain controversial within some portions of the higher education community, but they should be welcomed by taxpayers, families, and administrators looking for a way to broaden access without bankrupting either families or state and federal governments. By bringing college-level learning within the reach of the less advantaged and older, nontraditional students looking for ways to retool their skills, innovation can be one solution to America’s opportunity gap.
In summary, I have argued that, despite our dedication to the idea of a higher education system open to all, we are not doing a very good job of leveling the playing field. The result is that opportunity is still linked too strongly to class. In the longer term, the solution needs to involve improving the K–12 system. It also needs to involve making learning and access to skills beyond this level a less costly process and one that does not necessarily require four to six years of college. In the near term, more could be done to better inform students and their families about available options, including the availability of financial aid for well-prepared students from low-income families; the importance of matching one’s interests and skills with what different institutions have to offer; and the availability of more work-focused career and technical training for those most likely to drop out of college saddled with too much debt.