A bad 4 years for family income, a good 4 years for college prices

Gordon Green and John Coder recently published an ominous report entitled Household Income Trends During the Recession and Economic Recovery. In it, they looked at real (inflation corrected) median household income over the period beginning in December 2007 when the most recent recession began, through the recovery which began in June 2009, ending in the near-present, June 2011. Over that period December 2007 until June 2011, median real household income fell  by 9.6%.  I will talk about some of the details below, but would first like to compare what happened to price in higher education over that period.

I have written about what has happened to real average published tuition and fees in private non profit colleges and universities over an extended period ending with the academic year 2010-2011, based on College Board Data. I haven't found data for the AY 2011-2012 from College Board, but NAICU reports from their surveys that the increase for 2012 over 2011 is 4.6% in constant 2011 dollars. Putting this together with the previous College Board data and the CPI increase 2010-2012, one find that the percentage increase in real average published tuition and fees for these institutions going from 2007-2008 until 2011-2012 is 10.6%.

Combining these two data, one sees that the percentage of median real family income required to pay the average real tuition and fees increased over this four year period by 22.3%! 

Obviously "published tuition and fees"  differs from what is actually payed for many students, and many will say, as does the College Board, that increased student aid narrows this income gap. However, as I pointed out recently, much of this increased student aid is in the form of loans. In fact, the loan component has been increasing at about 2% a year above inflation for several decades, only slightly lower than the increase in published tuition and fees. While the loans are important, and enable many to attend college who could not attend without them, they are nonetheless a component of the price of college ultimately paid by the student and so should not be considered to be "aid". 

As detailed in this report, the temporal nature of the decline in family income is astounding.  Most of the decrease came not in the period of the recession itself - but during the subsequent "recovery". The period from Jan 2009 to present shows an almost uninterrupted sharp decline in family income. In addition, there are caveats and details everywhere that emphasize that no family is "average" or "median". There is a wealth of data in this report looking at different segments of the population and how their real income has be impacted by the downturn.  

Suffice it to say that almost every group studied shows a significant drop in earnings - including families headed by someone with a bachelor's degree. However, families headed by someone with less than a college degree generally see a significantly larger drop in real income than do the bachelor's degree families. Although family income is not one of the variables studied in this report, other studies show a strong correlation between educational attainment and household income. Thus, the large drop in income for lower educational attainment families, along with the continuing rapid increase in tuition and fees, combine to suggest that the issues of access for children of lower income backgrounds are rapidly becoming even more serious.

It is well worth looking at the entire report, and considering how its details might inform future pricing decisions in higher education.  

 

Comments

[Lisa Ransdell]

Thank you for framing some truly critical issues in higher education. It certainly seems to me that accessibility to higher education diminishes every day, and I really feel for the families of college-bound students. Appreciate your insights!

[cbs]

Interesting blog. It would be great if you can provide more details about it. Thank you by Mythili

[Krista R]

Mervelle,

I agree that the information is very scary. It seems as if the cost of education continues to rise and government aid is becoming more difficult to obtain. This issue makes me ask: is this problem of rising costs ever going to end?

[Mervelle A. Sage]

This is informative and scary. The cost of higher education is high enough without fear of it becoming more expensive. I have noticed the rise in financial aid packages that primarily offer loans. Scholarships and Grants are not as readily available anymore. Those that are available encounter so much red tape, paper work, and credentials that it makes it very difficult for many to obtain. It will always be those few students who get their family to help with the paperwork and hoopla that are able to get those scholarships and grants. It is very important to point out that the types of education a parent may hold in households do not necessarily dictate the family’s average income. Sometimes these findings are inconclusive because many of the modern families tend to not include other incomes that they may receive. All in all making adult education affordable is something we must try to strive for.

[Krista R]

Very interesting post. This is something that I had noticed, but enjoyed seeing it demonstrated the way you have it here. Thank you!

[Alexander]

Interesting post, I am so glad that I have visited your site. Really useful information!