With Three Smart Steps, Congress Can Make a Big Difference

I just paid off the last of my student loans. Today, I start saving for my children's college education, and I'm already behind. Like millions of Americans, by the time I retire, I will have spent over 75% of my life either paying or saving for college. It shouldn't be this hard.

The College Board recently reported that tuition and fees at public four-year colleges are up more than 37% in non-inflation-adjusted terms just since this year's senior class began college. At the current rate of tuition and fee increases, today's first-graders will be paying more than $341,000 for a four-year education at the University of Michigan at Ann Arbor by the time they reach college age. And that figure doesn't even include the cost of graduate school, which by then will be a prerequisite to joining the middle class. Michigan ranked third among the 50 states this fall, behind only Colorado and Kentucky, in the cost of tuition and fees at its public universities.

In the next several weeks, lawmakers in Washington will rewrite nearly all federal higher education law. There are three things Congress can and should do to help middle class families pay for college.

First, Congress can slow the growth in college tuition by conditioning future increases in federal financial aid on the maintenance of state funding for higher education. According to the U.S. Department of Education, the top driver of increased college tuition is declining state support for higher education,

Over the last four years, states have cut higher education funding, which accounts for about one-third of state spending, from an average of $6,874 per pupil to $5,721. Michigan has cut state support for higher education by $200 million over the last four years.

There is little incentive to stop these cuts, because they make it easy for state politicians to balance their budgets. The only consequence is for students, who face increased tuition and student loan debt.

Federal Medicaid, transportation, and elementary and secondary education funding are all conditioned on a state match. Increased federal funding for higher education should be conditioned on a state's maintaining, not cutting, its own fiscal effort on behalf of higher education as well. As a matter of course, Congress should stop states from balancing their budgets on the backs of college students.

Second, and without raising taxes a single penny, Washington can and should increase student financial aid. According to the Congressional Budget Office, Washington spends about $9 billion more each year than is necessary on student loan bank subsidies and middlemen. President George W. Bush's most recent budget called these bank subsidies "unnecessarily excessive" and proposed cutting them by $4.5 billion a year.

If Congress would accept President Bush's student loan bank subsidy cuts, it could give every college loan borrower over $500 more in extra grant aid each year--enough to cover the costs of books. If Congress went further and cut all the waste out of the student loan program, it could give every borrower more than $1,000 in additional grant aid each year.

Third, Washington should require every college to be candid about the full, four-year cost of going to college. Tuition increases fluctuate wildly from year to year, undermining family financial planning and increasing dropout rates. In 2002, U-M tuition and fees increased 7.9%. In 2003, they increased 6.5%. In 2004, they went up 15.9%. This year, tuition and fees are up 12.3%. Every Ann Arbor student knows that his or her tuition will go up from one year to the next, but this year's senior class had no idea that its tuition was going to increase some 38.7% since freshman year.

Public and private institutions of higher education should be required to set multi-year tuition and fee levels for each cohort of students at the beginning of each student's freshman year. Tuition costs can increase from one year to the next for individual students, but families should know at the time of enrollment how much of an increase they will confront on an annual basis. This is happening at Central Michigan University, which last summer approved a plan to raise freshman tuition 19% but with a guarantee that costs will remain the same for these students for five years.

These three simple steps--slowing the growth in tuition, increasing financial aid, and helping families plan for college cost increases--would make higher education more affordable and accessible for the middle class.

It hasn't happened to date, because too many politicians in Washington are afraid that if they condition federal financial aid on state action, they will be accused of hurting students. And they haven't cut the gross waste in the student loan program, because many of those same politicians are beholden to the banks reaping big profits on student loans. But ducking the college cost problem does a disservice to students and the country, and ducking waste in the student loan program does a disservice to taxpayers. Federal financial aid should help students and families, not state politicians and big banks.