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Click here to access:  Issue #211 January 2010  (Full Issue)

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Trends in Financial Barriers to Higher Education by Parental Income and Institutional Type/Control, 1990 to 2008

The financial aid "system" of American higher education is broken. The financial barriers to higher education it was created to eliminate have instead grown steadily in recent decades as our analysis here clearly shows. These financial barriers are twisting and perverting student demand for higher education with privately and publicly destructive consequences.

This hodgepodge was created piecemeal over many decades by many federal, state, institutional and business entities with different interests in college affordability. The central purpose of financial aid was to remove financial barriers to higher education opportunity. Of course commercial, institutional, and political interests were all to be accommodated.

But the hodgepodge has been so neglected, twisted, perverted, underfunded and abused for the last three decades that the system itself is now raising financial barriers to higher education access, choice, persistence and degree completion. It has failed. And the financial barriers that have arisen are now so great that incremental changes, technical adjustments or new program solutions cannot begin to address the enormous problems identified here. The system as it exists is hopelessly broken.

This report documents the failure of the financial aid hodgepodge using data from the last seven National Postsecondary Student Aid Studies conducted between 1990 and 2008. These data identify and measure in four ways the gaps between costs of college attendance and resources available to students and their parents to pay those costs.

Fortunately, student demand for higher education remains strong. In the absence of alternatives, the share of recent high school graduates pursuing higher education immediately following high school is at record highs--at least by America's weak standards. In international rankings we are not doing particularly well. But we are certainly doing better than we have compared to our past performance.

However, student enrollment patterns are changing in response to the failed financial aid hodgepodge.

• Recent high school graduates are moving down the price ladder of higher education to the lowest priced rungs in community colleges. This shift began in 2002, and a smaller share of recent high school graduates are entering 4-year institutions than at any time since these data were first reported in 1991.
• This shift from 4-year to 2-year colleges is now occurring across all income classes--even among students from the richest families.
• Of those freshmen still entering 4-year colleges and universities, now about 60 percent are entering their first choice institution. This is down sharply from about 70 percent in 2005, and 80 percent three decades earlier.
• The share of undergraduates with Pell Grants that are enrolled in public and private 4-year colleges has declined from about 60 percent in the 1970s to a record low of 41.3 percent by 2009. Instead these students are increaslingly concentrated in proprietary schools and community colleges.

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