Community

Beyond Tuition: How Innovations in College Affordability Are (Or Aren’t) Helping Students

By Sydney Johnson     Jun 12, 2018

Beyond Tuition: How Innovations in College Affordability Are (Or Aren’t) Helping Students

The college affordability crisis is a familiar story to most Americans. A simplified version often goes that state funding for higher-ed institutions has decreased dramatically over the years, which has translated into massive tuition hikes for students and their families.

Sandy Baum, a fellow in the Education Policy Program at the Urban Institute, watches the issue—and its proposed solutions—closely. The story usually gets encapsulated into examples of students trapped in hundreds of thousands of dollars of debt. And while this may be the case for some students, Baum notes that it’s not always the full picture.

Adding to that complexity of affordability and financial aid, a handful of startups and nonprofits have pitched themselves as a solution for students, whether it’s helping them find and apply for financial aid or by offering shorter-term and cheaper alternative degrees.

EdSurge talked with Baum about these issues—and about how innovative approaches are or aren’t helping solve the college affordability crisis. Subscribe to the EdSurge On Air podcast on your favorite podcast app (like iTunes or Stitcher). Or read highlights from the conversation (which have been edited and condensed for clarity).

EdSurge: Tuition has skyrocketed but we know there are a lot of additional costs associated with college. There's housing, transportation and plenty of others. One criticism of free community college programs is that they don't account for these expenses always. So from your perspective, are these free programs free enough?

Baum: There are lots of weaknesses to free community college programs. One of them is that free means tuition-free. It does not usually mean that your whole budget is covered. The reality is that for low-income students, a very large percentage of low and moderate-income students get their tuition covered at community colleges even without these programs because they are eligible for any say, grant aids.

Most [free] college programs are what we call last-dollar programs, where they say if you do not have enough grant aid to cover your tuition and fees, then we'll give you money to cover the rest of it. So most of the free community college programs are only giving extra money to people who aren't really poor, who can afford to pay the tuition. They're not helping low-income students at all, in terms of giving them extra money.

What we would need would be if you actually erased the tuition, and the low-income students could keep their Pell Grants. Then they could use that money to help cover their books and supplies and their living expenses. So just saying free tuition, absolutely does nothing to help financially most of the low-income students. It does not address the problems that students face with their living expenses while they are in school.

That idea that you shared of what this could look like in order to be more supportive for low-income students, are there any examples of that actually happening right now?

Some of the local College Promise programs I think do that. But often no. The free community college program that the Obama Administration proposed at the national level would have made tuition go away and let people keep their Pell Grants, but the fact is that's a much more expensive way to do it, and that's the reason that that's not the way it usually happens.

You've said before that the type of a degree that a student earns is part of the college-cost equation. Could you explain that a bit more?

Sure. When people talk about, ‘Is college affordable or not?’ unfortunately, too often, what they're actually saying is it's expensive and you think that things that are expensive are worse for people than things that are cheaper. And the reality is that college is an investment, and people go to college for a number of reasons. We hope that one of those good reasons is to learn and to think better and to improve their lives, but it also is of course to improve their employment opportunities and to increase their wages. And for most people, college is a very good investment. So you pay for it up front and then it pays off over the long run. And what that means is that the question is, ‘Is it a good investment?’

If you buy something that's cheap but you end up throwing it in the garbage can the next day, it was really not worth it. And the same thing holds for a college. If you just pick the cheapest program, but it turns out to be a lousy school—they don't have enough support systems, you don't graduate or you graduate and you can't get a job with your degree—then it doesn't matter how little you paid for it, it wasn't worth it. It wasn't affordable.

However, you might invest in a relatively expensive education and it will pay off over your life. If you borrowed money, you can pay it back out of your earnings premium without using up that earnings premium, and you will have had an affordable education even if it was expensive. So the value of what you're buying is very important.

There's certainly been an uptick in the number of alternative online degrees and badges over the years. When you talk about the value of a degree being part of the cost equation, what do you make of these, and what are some of the pros and cons you see here?

Well, one of the issues with many of these certifications is that they may pay off really well, but that actually the people who benefit from them are frequently people who already have gone to college. So it's really important to divide these badges and certifications up and to divide the people who are taking advantage of them up into the categories of where they are when they start out. So these coding bootcamps that were all the rage for a while, the people who seemed to be most successful with them were people who already had bachelors degrees.

Online learning can be wonderful for many people, but the people who don't already know how to study and learn, the people who have not been successful in school already, are least likely to benefit from them. They are most likely to have outcomes that are not nearly as good as outcomes in the classroom. So it's really hard to paint these with a broad brush.

Advocates of these sorts of micro-credentials will sometimes argue that it can be an alternative to paying the thousands of dollars that a degree might cost. So knowing the risks that you mentioned, do you buy that at all?

This is not really about college affordability. I mean, I think that the issue is that many people are starting college programs that they don't finish. And that's a terrible problem. So if all you know is, ‘I'm supposed to go to college,’ and you have no idea what you want to do and you go to a school that doesn't serve you well or you wander around and you take a bunch of classes and you end up with nothing, that's really not a good plan.

There's a lot of evidence that having more structure, the whole movement towards guided pathways, is really important. And these micro-credentials and badges are generally very specific, where your goal is and you can do it in a shorter time, and that can be very helpful for a lot of people. So that seems really important and in that sense it certainly helps with the affordability problem. But it's not at all clear that these things are, in general, cheaper per course or cheaper per year than a college degree.

There's a number of nonprofits and for-profit startups that have formed in recent years to address college affordability by helping students find and apply for financial aid and scholarships. Are these ideas new, and do you see some of these newer startups making a dent in the issue?

It is not in any way a new idea, that you might charge people to help them get financial aid. It has been something that has been a serious problem for people for many years. You should not have to pay anyone to do a financial-aid application, to find where you apply, to get the financial aid that you have coming to you. The federal government has a form that everybody has to fill out. Institutions will help you. Non-profit organizations will help you. You can get help online. I would be very careful before recommending, to anyone, that they spend money to apply for financial aid.

Your research has found that student-loan debt is not created equal, and that wealthier students often take on more student debt. Can you say more about your findings?

Right, so first of all, the student debt problem is not by and large a problem of students borrowing a lot of money. It's a problem of students borrowing money and then not getting an education that is a good value, or that turns out in retrospect to be affordable. So, in other words, the default rates on student loans are inversely related to how much you borrowed, so the people most likely to default are people who borrowed less than $10,000. That accounts for a huge percentage of the default.

People who borrow a lot of money are less likely to default, and that's because those are people, by and large, who went to school for a long time. They have at least a Bachelor's degree, and most of them who have huge amounts of debt also have some sort of a graduate education. And so they are much more likely to repay their loans than people who borrowed a little bit.

People who are older borrow more than people who are younger (adults going back to school). And part of that is simply that the federal government has higher loan limits for older students—they're allowed to borrow more, and of course they don't have parents who could borrow instead. And they borrow for they're living expenses. It's not that they're going to expensive colleges, although they are more likely to go to for-profit colleges. So older students are quite vulnerable.

Black students also borrow significantly more at every degree level than people from other racial and ethnic groups, including Hispanic students. So black students who get their Bachelor's degrees, one, tend to be older and have been at school for a longer time than other institutions than others. And they just have much higher default rates and more difficulty repaying their loans. They earn less when they graduate.

So black students and older students and students who go to for-profit institutions, are the students who borrow the most for their level of education. And that's a problem.

But it's not the image of, here's this middle-class, white student going off and getting a Bachelor's degree and having $100,000 of debt. That is just so rare. There are so few people in that situation, those are not the people we need to be worried about.

It's not uncommon to hear that the cost of college isn't worth it anymore. What's your response to that narrative when you hear it?

It's extremely irritating and very frustrating. And almost everyone who says that is sending their own children to college. I mean, the average return to a college education is as high as it has ever been, and the payoff doesn't have to keep rising over time in order to be very worth it. And so it's just the best investment that most people could make.

It is true that too many people are going to college and not completing. And, if you go to college and you don't complete, you get very little of the benefit. So it means you have to make decisions that are good. You can't just go to college, you have to think about where you're going and why you're going and what you're going to study, just as you would if you were starting a small business. You wouldn't just say, oh, I'm going to open a business. You would try to figure out which businesses will have a good rate of return.

Earlier this year you testified before the Senate Health Committee regarding reauthorizing the Higher Education Act and improving college affordability. So looking ahead, how seriously do you think senators are considering college costs, and what are you expecting to come out of that if the act is reauthorized?

Well, it's not looking good for the act being reauthorized in the short run. It's really going to depend, I think, on the composition of congress at the time that the act gets reauthorized.

I think that there are some important things that congress can do and may do. They may strengthen student loan programs. They may make income-based loan repayment simpler, more transparent, easier for students to navigate, and that's a very important piece of college affordability because if you are one of the people who goes to college and borrows money and then it doesn't pay off, then that is a really difficult situation to be in, and we need to have a system that makes it possible for you to easily get the insurance that you need that if it doesn't pay off you're not going to be stuck repaying these loans that didn't do you any good.

I worry that some people are thinking about college affordability for middle and upper-income students instead of taking that college affordability for the people who really can't afford it. So we really need to be focused on the institutions that educate the vast majority of students. Those are public institutions, and they are not necessarily the public flagships but broad access public foyers, community colleges. And the other thing we really need to do—and I would hope that this would happen, but it’s not immediately on the horizon—is that we need to protect students from the kind of fraud and abuse that they get at many institutions, particularly at many for-profit institutions.

Community

Beyond Tuition: How Innovations in College Affordability Are (Or Aren’t) Helping Students

By Sydney Johnson     Jun 12, 2018

Beyond Tuition: How Innovations in College Affordability Are (Or Aren’t) Helping Students

The college affordability crisis is a familiar story to most Americans. A simplified version often goes that state funding for higher-ed institutions has decreased dramatically over the years, which has translated into massive tuition hikes for students and their families.

Sandy Baum, a fellow in the Education Policy Program at the Urban Institute, watches the issue—and its proposed solutions—closely. The story usually gets encapsulated into examples of students trapped in hundreds of thousands of dollars of debt. And while this may be the case for some students, Baum notes that it’s not always the full picture.

Adding to that complexity of affordability and financial aid, a handful of startups and nonprofits have pitched themselves as a solution for students, whether it’s helping them find and apply for financial aid or by offering shorter-term and cheaper alternative degrees.

EdSurge talked with Baum about these issues—and about how innovative approaches are or aren’t helping solve the college affordability crisis. Subscribe to the EdSurge On Air podcast on your favorite podcast app (like iTunes or Stitcher). Or read highlights from the conversation (which have been edited and condensed for clarity).

EdSurge: Tuition has skyrocketed but we know there are a lot of additional costs associated with college. There's housing, transportation and plenty of others. One criticism of free community college programs is that they don't account for these expenses always. So from your perspective, are these free programs free enough?

Baum: There are lots of weaknesses to free community college programs. One of them is that free means tuition-free. It does not usually mean that your whole budget is covered. The reality is that for low-income students, a very large percentage of low and moderate-income students get their tuition covered at community colleges even without these programs because they are eligible for any say, grant aids.

Most [free] college programs are what we call last-dollar programs, where they say if you do not have enough grant aid to cover your tuition and fees, then we'll give you money to cover the rest of it. So most of the free community college programs are only giving extra money to people who aren't really poor, who can afford to pay the tuition. They're not helping low-income students at all, in terms of giving them extra money.

What we would need would be if you actually erased the tuition, and the low-income students could keep their Pell Grants. Then they could use that money to help cover their books and supplies and their living expenses. So just saying free tuition, absolutely does nothing to help financially most of the low-income students. It does not address the problems that students face with their living expenses while they are in school.

That idea that you shared of what this could look like in order to be more supportive for low-income students, are there any examples of that actually happening right now?

Some of the local College Promise programs I think do that. But often no. The free community college program that the Obama Administration proposed at the national level would have made tuition go away and let people keep their Pell Grants, but the fact is that's a much more expensive way to do it, and that's the reason that that's not the way it usually happens.

You've said before that the type of a degree that a student earns is part of the college-cost equation. Could you explain that a bit more?

Sure. When people talk about, ‘Is college affordable or not?’ unfortunately, too often, what they're actually saying is it's expensive and you think that things that are expensive are worse for people than things that are cheaper. And the reality is that college is an investment, and people go to college for a number of reasons. We hope that one of those good reasons is to learn and to think better and to improve their lives, but it also is of course to improve their employment opportunities and to increase their wages. And for most people, college is a very good investment. So you pay for it up front and then it pays off over the long run. And what that means is that the question is, ‘Is it a good investment?’

If you buy something that's cheap but you end up throwing it in the garbage can the next day, it was really not worth it. And the same thing holds for a college. If you just pick the cheapest program, but it turns out to be a lousy school—they don't have enough support systems, you don't graduate or you graduate and you can't get a job with your degree—then it doesn't matter how little you paid for it, it wasn't worth it. It wasn't affordable.

However, you might invest in a relatively expensive education and it will pay off over your life. If you borrowed money, you can pay it back out of your earnings premium without using up that earnings premium, and you will have had an affordable education even if it was expensive. So the value of what you're buying is very important.

There's certainly been an uptick in the number of alternative online degrees and badges over the years. When you talk about the value of a degree being part of the cost equation, what do you make of these, and what are some of the pros and cons you see here?

Well, one of the issues with many of these certifications is that they may pay off really well, but that actually the people who benefit from them are frequently people who already have gone to college. So it's really important to divide these badges and certifications up and to divide the people who are taking advantage of them up into the categories of where they are when they start out. So these coding bootcamps that were all the rage for a while, the people who seemed to be most successful with them were people who already had bachelors degrees.

Online learning can be wonderful for many people, but the people who don't already know how to study and learn, the people who have not been successful in school already, are least likely to benefit from them. They are most likely to have outcomes that are not nearly as good as outcomes in the classroom. So it's really hard to paint these with a broad brush.

Advocates of these sorts of micro-credentials will sometimes argue that it can be an alternative to paying the thousands of dollars that a degree might cost. So knowing the risks that you mentioned, do you buy that at all?

This is not really about college affordability. I mean, I think that the issue is that many people are starting college programs that they don't finish. And that's a terrible problem. So if all you know is, ‘I'm supposed to go to college,’ and you have no idea what you want to do and you go to a school that doesn't serve you well or you wander around and you take a bunch of classes and you end up with nothing, that's really not a good plan.

There's a lot of evidence that having more structure, the whole movement towards guided pathways, is really important. And these micro-credentials and badges are generally very specific, where your goal is and you can do it in a shorter time, and that can be very helpful for a lot of people. So that seems really important and in that sense it certainly helps with the affordability problem. But it's not at all clear that these things are, in general, cheaper per course or cheaper per year than a college degree.

There's a number of nonprofits and for-profit startups that have formed in recent years to address college affordability by helping students find and apply for financial aid and scholarships. Are these ideas new, and do you see some of these newer startups making a dent in the issue?

It is not in any way a new idea, that you might charge people to help them get financial aid. It has been something that has been a serious problem for people for many years. You should not have to pay anyone to do a financial-aid application, to find where you apply, to get the financial aid that you have coming to you. The federal government has a form that everybody has to fill out. Institutions will help you. Non-profit organizations will help you. You can get help online. I would be very careful before recommending, to anyone, that they spend money to apply for financial aid.

Your research has found that student-loan debt is not created equal, and that wealthier students often take on more student debt. Can you say more about your findings?

Right, so first of all, the student debt problem is not by and large a problem of students borrowing a lot of money. It's a problem of students borrowing money and then not getting an education that is a good value, or that turns out in retrospect to be affordable. So, in other words, the default rates on student loans are inversely related to how much you borrowed, so the people most likely to default are people who borrowed less than $10,000. That accounts for a huge percentage of the default.

People who borrow a lot of money are less likely to default, and that's because those are people, by and large, who went to school for a long time. They have at least a Bachelor's degree, and most of them who have huge amounts of debt also have some sort of a graduate education. And so they are much more likely to repay their loans than people who borrowed a little bit.

People who are older borrow more than people who are younger (adults going back to school). And part of that is simply that the federal government has higher loan limits for older students—they're allowed to borrow more, and of course they don't have parents who could borrow instead. And they borrow for they're living expenses. It's not that they're going to expensive colleges, although they are more likely to go to for-profit colleges. So older students are quite vulnerable.

Black students also borrow significantly more at every degree level than people from other racial and ethnic groups, including Hispanic students. So black students who get their Bachelor's degrees, one, tend to be older and have been at school for a longer time than other institutions than others. And they just have much higher default rates and more difficulty repaying their loans. They earn less when they graduate.

So black students and older students and students who go to for-profit institutions, are the students who borrow the most for their level of education. And that's a problem.

But it's not the image of, here's this middle-class, white student going off and getting a Bachelor's degree and having $100,000 of debt. That is just so rare. There are so few people in that situation, those are not the people we need to be worried about.

It's not uncommon to hear that the cost of college isn't worth it anymore. What's your response to that narrative when you hear it?

It's extremely irritating and very frustrating. And almost everyone who says that is sending their own children to college. I mean, the average return to a college education is as high as it has ever been, and the payoff doesn't have to keep rising over time in order to be very worth it. And so it's just the best investment that most people could make.

It is true that too many people are going to college and not completing. And, if you go to college and you don't complete, you get very little of the benefit. So it means you have to make decisions that are good. You can't just go to college, you have to think about where you're going and why you're going and what you're going to study, just as you would if you were starting a small business. You wouldn't just say, oh, I'm going to open a business. You would try to figure out which businesses will have a good rate of return.

Earlier this year you testified before the Senate Health Committee regarding reauthorizing the Higher Education Act and improving college affordability. So looking ahead, how seriously do you think senators are considering college costs, and what are you expecting to come out of that if the act is reauthorized?

Well, it's not looking good for the act being reauthorized in the short run. It's really going to depend, I think, on the composition of congress at the time that the act gets reauthorized.

I think that there are some important things that congress can do and may do. They may strengthen student loan programs. They may make income-based loan repayment simpler, more transparent, easier for students to navigate, and that's a very important piece of college affordability because if you are one of the people who goes to college and borrows money and then it doesn't pay off, then that is a really difficult situation to be in, and we need to have a system that makes it possible for you to easily get the insurance that you need that if it doesn't pay off you're not going to be stuck repaying these loans that didn't do you any good.

I worry that some people are thinking about college affordability for middle and upper-income students instead of taking that college affordability for the people who really can't afford it. So we really need to be focused on the institutions that educate the vast majority of students. Those are public institutions, and they are not necessarily the public flagships but broad access public foyers, community colleges. And the other thing we really need to do—and I would hope that this would happen, but it’s not immediately on the horizon—is that we need to protect students from the kind of fraud and abuse that they get at many institutions, particularly at many for-profit institutions.

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