Righting the ship on higher education costs

Tuesday, August 27, 2013

President Obama announced last week an initiative to lower the cost of college for the middle class. He is on the right topic. Higher education, America’s flagship of international leadership, is a proud vessel in need of attention. I just hope he won’t replace the rudder without patching the leaks.

The cost of higher education as measured by private and public tuition has indeed risen at rates higher than inflation, roughly 4% per year for non-profit private tuition. And Obama is rightly focused on the middle class — incomes for upper income brackets have risen faster than the rate of tuition, so that for those groups the cost of tuition as a fraction of household income has actually come down. At the other end of the spectrum, for students from lower income families, tuition is often free! That is, need-based aid provided by the university (largely from its endowment as well as revenue from the full-tuition payers) covers the tuition entirely. It’s the middle class, as Obama’s initiative recognizes, that is increasingly squeezed.

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