Students and parents should factor in the long-run benefits of college, not just tuition cost.
The notion that college is unaffordable is often a part of the national discourse on higher education. Even casual observers of this space are quick to point out that the cost of higher education is higher than it's ever been and growing at an alarming rate. Pressure on policymakers to take steps that would reduce the cost of higher education is at an all-time high, as evidenced by the growing number of free college proposals and frequent calls to refinance and forgive outstanding student debt. But there's a big problem with this narrative: It's all about cost and not at all about the benefits of higher education.
As the cost of higher education continues to grow, a new framework for considering college affordability is necessary. In the past, students could find the money to pay for college by pinching pennies and working a part-time job. People's willingness to pay for college was often determined by how much of their savings and weekly earnings could be devoted to paying tuition, while still having enough to cover other expenses.
But in today's high-cost and potentially high-reward system of higher education, that manner of thinking about college affordability simply doesn't work. Savings often falls short of the cost of higher education and families are relying on debt to pay for a growing fraction of the cost of college. This has left consumers struggling to understand what is affordable to them and how to make decisions about enrollment and costs.
Students and their families will be best served by considering college enrollment decisions using a cost-benefit framework. That is, consider whether the long-run benefits, financial or otherwise, outweigh the upfront costs. Certainly, some students already make decisions this way, and consumers are familiar with this concept of affordability in the market for other goods and services. Yet, as a recent report I coauthored for the Manhattan Institute points out, the underlying notion that price alone isn't a good indicator of long-run affordability isn't always baked into the public discourse on this issue.
Often, the notion of college affordability in higher education refers to the financial constraints caused by a lack of cash on hand. In other words, higher education is affordable if a student can come up with the cash to make the payments for tuition and fees, as well as cover their cost of living. Some also talk about college affordability as if it's solely about whether parents can pay for their children to attend college. This notion is often conjured by politicians when trying to appeal to the concerns of middle- and high-income families. But it is disconnected from the reality that only about two-thirds of students go directly from high school to college, and that those who do tend to come from more well-off families.
The problem with these notions of affordability is that they can send the wrong messages to students about the best way to invest their hard-earned dollars in higher education. For instance, the cash-on-hand notion of affordability implicitly sends the message that the lowest cost options are the more affordable. However, we know that this will often be false economy. Student outcomes and long-run financial payoffs are often higher in higher cost programs of study. And the second notion, which frames affordability as a function of parents' willingness or ability to pay for their child's enrollment, leaves behind financially independent adults, who are perhaps most in need of our concern.
Solving the problems in higher education require a nuanced understanding of the actual challenges that stand in the way of it working well and a mechanism for providing access to economic opportunity. Policy solutions that simply tackle the cost of college and the debt that results from that cost will often lead us in the wrong direction.
Consider, for instance, the proposal to refinance outstanding student loan debt at lower interest rates. This sounds like a fine idea at first blush, but the reality is that it would do almost nothing to help borrowers who are struggling to repay their debts and would amount to a largely regressive expenditure of tax dollars. Evidence indicates that borrowers with the largest student loan balances find loan repayment to be more affordable than it is for borrowers with low balances.
Another policy solution that has recently gained widespread support is making college free. We saw this idea take center stage in the recent presidential election, as it was a core part of 2016 candidate Vermont Sen. Bernie Sanders' platform and eventually became a part of Hillary Clinton's platform as well. Free college certainly solves the problem of students lacking the cash on hand to pay for college, but it obfuscates the issue of affordability by shifting the expense to taxpayers without regard for the likely negative implications for both individual and societal return on investment or affordability.
This may seem like semantics, but understanding how to think about and define college affordability is critically important. Without it, students and their families lack guidelines for thinking about how to invest in higher education, and policymakers will introduce policies that fail to address the greatest challenges in higher education and tend to deliver the most support to students who need it the least.
This piece originally appeared in U.S. News & World Report
Beth Akers is a senior fellow at the Manhattan Institute and coauthor of "Game of Loans: The Rhetoric and Reality of Student Debt."