Rising Income Inequality Tightly Bound to Rising College Costs

Yesterday the New York Times published news of data about rising income inequality, updated for 2012 by respected economists Thomas Piketty and Emmanuel Saez.  “The top 10 percent of earners took more than half of the country’s total income in 2012,” the highest level of inequality since data collection began.  The top one percent collected one fifth of total income. “The figures underscore that even after the recession the country remains in a new Gilded Age,” according to the reporter.  The income share of the top one percent of earners recovered the level prior to the Great Recession, reaching 22.5 percent in 2012.

Catherine Hill, president of private Vassar College and a professor of economics, recently published a Washington Post opinion piece charging:  Higher Education’s Biggest Challenge Is Income Inequality.  Writes Hill: “The highest-income families are able and willing to pay the full sticker price.  Schools compete for these students, supplying the services that they desire, which pushes up costs…  But the lagging incomes of families that earn less escalate the need for financial aid.”

Hill questions President Obama’s call on colleges to slow growth in tuition, because cuts in tuition for those who can afford to pay only result in less financial aid for those who cannot afford tuition.  “Lower tuition combined with lower financial aid benefits higher-income students and hurts lower-income students.  As a result it reinforces income inequality.”  Noting that, “The federal government is in the best position to directly address the rise in income inequality,” Hill suggests that the President and Congress create incentives to assist colleges and universities to serve the low income students who require extensive financial aid.

A new study from Pro-Publica and the Chronicle of Higher Education examines the rising cost of attending public colleges and universities, cost increases deriving from tax cuts in many states on top of the lingering effects of the 2008 recession: “Public colleges and universities were generally founded and funded to give students in their states access to an affordable college education… But many public universities, faced with their own financial shortfalls, are increasingly leaving low-income students behind….”  According to ProPublica, between 1996 and 2012, public college and university grants declined for the lowest quartile of families by income: “Public universities have been shifting their aid, giving less to the poorest students and more to the wealthiest.”  Financial constraints cause colleges and universities to augment scarce budgets by giving modest scholarships to several students who can pay the rest of their own tuition instead of granting full rides to the neediest students.

In addition, according to Pro-Publica, colleges are also regularly attempting to boost their rankings in publications like U.S. News and World Report by using financial aid to attract students who score higher on the SAT, especially if these students can also bring in more tuition revenue.  According to Anthony Carnevale, director of Georgetown University’s Center on Education and the Workforce, “The whole system is constantly moving up, going upstream to get better and better students, and get students who can pay.  It all looks great for the press release  But you’re systematically leaving people behind.”

2 thoughts on “Rising Income Inequality Tightly Bound to Rising College Costs

  1. Thank you for this piece, Jan. It’s helpful, as your posts tend to be. The narrowing of competition, looking for “proven winners” and greatest benefit (return on investment), is turning us into a regressive nation.

  2. Pingback: Rising Income Inequality Tightly Bound to Rising College Costs | PAChurchesAdvocacy.org

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