BRINGING OPPORTUNITY WITHIN REACH: RENEWING OUR COMMITMENT TO QUALITY AND AFFORDABLE HIGHER EDUCATION FOR ALL AMERICANS

INTRODUCTION The staggering cost of post-secondary education creates an impossible choice for too many students: take on tens of thousands of dollars in debt to finance a degree with unknown job prospects, or forego college or vocational training altogether, even though higher education continues to offer an unparalleled return on investment. Between 1980 and 2010, the total cost of attending a four-year public college or university increased by 144 percent.1 These cost increases have not been limited to traditional colleges; community colleges, traditionally a low-cost option for more technical career tracks, have seen tuition rise by 24 percent in the last five years, with an almost six percent increase in the last year alone. 2 As tuition increases, so too does the burden of student debt. In 2011, the average student borrower graduated with $26,600 of debt,3 and almost one in five student loans were more than three months delinquent in 2012, up from one in ten in 2004. 4 This unprecedented strain has forced many students to choose between taking on an extraordinary financial burden and acquiring the skills needed to be successful in todays economy. We must make a post-secondary education available to every American, whether they attend a traditional four-year college, a community college, or pursue a vocational or technical school education. Bachelors degrees merit special attention. They provide a 15 percent return on investment per year5more than twice as much as the stock marketand graduates of four-year colleges earn almost one million dollars more than high school graduates over the course of their careers.6 Yet, skyrocketing costs have made these colleges and subsequent job opportunities out of reach for millions of Americans. We must also recognize that a college education is not the only path to the middle class. This means increasing funding for community colleges, improving access to vocational schools, and developing certification systems that reward people, like veterans, who learn needed skills outside of a classroom. In doing so, we can ensure that all Americans have the skills and credentials to succeed in the 21st century economy. No matter the type of post-secondary education, we must ensure that it is both affordable and transparent, so that students and their families can make informed, forward-looking decisions. Nothing less than the
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All increases account for inflation unless noted otherwise. Between 1964 and 2010 refers to the 1964-65 and 201011 school years. Average Undergraduate Tuition and Fees and Room and Board Rates Charges for Full-Time Students In Degree-Granting Institutions, by Level and Control of Institutions: 1964-65 through 2010-11, Institute of Education Sciences, (accessed September 20, 2013), http://nces.ed.gov/programs/digest/d11/tables/dt11_349.asp. 2 Phillip Elliott, College Costs Keep Rising Faster than Inflation, Survey Says, Christian Science Monitor, (August 13, 2013), http://www.csmonitor.com/Business/Latest-News-Wires/2013/0813/College-costs-keep-rising-fasterthan-inflation-survey-says. 3 Project on Student Debt: State by State Data, The Institute for College Access & Success , (October 2012), http://projectonstudentdebt.org/state_by_state-view2012.php?area=NJ. 4 Michael Greenstone and Adam Looney, Rising Student Debt Burdens: The Factors Behind the Phenomenon, Brookings Institution, (July 5, 2013), http://www.brookings.edu/blogs/jobs/posts/2013/07/05-student-loans-debtburdens-jobs-greenstone-looney. 5 Michael Greenstone and Adam Looney, Where is the Best Place to Invest $102,000 -- In Stocks, Bonds, or a College Degree? Brookings Institution, (June 25, 2011), http://www.brookings.edu/research/papers/2011/06/25education-greenstone-looney. 6 Anthony P. Carnevale, Stephen J. Rose, and Ban Cheah, The College Payoff: College, Education, Lifetime Earnings, Georgetown University Center on Education and the Workforce, (August 5, 2011), http://www9.georgetown.edu/grad/gppi/hpi/cew/pdfs/collegepayoff-summary.pdf.

quality of life for millions of Americans, social mobility at the heart of the American Dream, and our nations future economic competitiveness hang in the balance.

I. HELPING FAMILIES AFFORD HIGHER EDUCATION The Great Recession served as a stark reminder of the challenges facing those without post-secondary education. Nearly 80 percent of the jobs lost during the recession were held by Americans who had, at most, completed high school.7 Similarly, during our economic recovery, while employment prospects have improved for those with a post-secondary degree, jobs for workers without post-secondary education continue to disappear. 8 Though we have made great strides in improving access to higher education over the last 30 yearsthe adult population with post-secondary degrees has increased by 24 percentwe must redouble our efforts to make college more affordable. 9 Cost should never prevent an American from pursuing the knowledge and skills needed to succeed. Therefore, we should: a. Keep student loan rates predictable and low. Currently, about one-fifth of student loans are over three months delinquent,10 and the federal student loan default rate for borrowers in their first two years of repayment exceeds nine percent. 11 After months of gridlock, Congress approved legislation this summer to restructure the federal student loan program by imposing limits on how high rates could rise and tying interest rates for new student loans to the interest rate of the 10year Treasury note. While this solution keeps the rates students pay relatively low in the short term, loan rates may surpass the current rate within five years as the economy improves. We must act aggressively to keep student loan rates low. In doing so, we can relieve our graduates of an unmanageable debt burden and decrease the likelihood of default. b. Provide federal support to incentivize Pay it Forward-style programs. Under a Pay-itForward system, students do not pay upfront tuition or take out traditional loans, but rather pay the cost of their education through a post-graduation payroll deductiona small percentage of their adjusted gross income for a designated number of years following graduation. By tying repayment to income, debt becomes more manageable, especially during tough economic times or if students choose careers with lower earning potential. Under this financing structure, payments would be directed to a statewide higher education fund that, if configured correctly, would eventually be self-sustaining. The State of Oregon has already passed legislation to explore a Pay-it-Forward pilot program.12 The federal government should pursue ways to assist states, like Oregon, undertaking innovative strategies. Additionally, we should consider other avenues to limit student debt burden, including income-based repayment systems like those recently proposed by President Obama and some members of Congress.
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Anthony Carnevale, Tamara Jayasundera, Ban Cheah, The College Advantage: Weathering the Economic Storm, Georgetown Public Policy Institute, Center on Education and the Workforce, (August 2012), http://www9.georgetown.edu/grad/gppi/hpi/cew/pdfs/CollegeAdvantage.FullReport.081512.pdf. 8 Id. 9 Census Stats Show Degree Holders Less Likely to Be Unemployed, National Association of Student Financial Aid Administrators, (accessed September 21, 2013), http://www.nasfaa.org/research/News/Census_Stats_Show_Degree_Holders_Less_Likely_to_Be_Unemployed.aspx. 10 Michael Greenstone and Adam Looney, Rising Student Debt Burdens: The Factors Behind the Phenomenon, Brookings Institution, (July 5, 2013), http://www.brookings.edu/blogs/jobs/posts/2013/07/05-student-loans-debtburdens-jobs-greenstone-looney. 11 First Official Three-Year Student Loan Default Rates Published, U.S. Department of Education, (September 28, 2012), http://www.ed.gov/news/press-releases/first-official-three-year-student-loan-default-rates-published. 12 Douglas Belkin, Oregon Explores Novel Way to Fund College, Wall Street Journal, (July 3, 2013), http://online.wsj.com/article/SB10001424127887324251504578582101593420808.html.

c. Create a college and technical school trust fund for children in households that receive EITC benefits. As proposed in this campaigns policy paper on child poverty, the federal government should create a college savings trust plan tied to the Earned Income Tax Credit. The plan would place a $400 per year, per child deposit into a trust account that could be used for approved postsecondary college or career education. The deposit would be issued in conjunction with a familys EITC payment and would need to be accessed within a set time frame following high school graduation. An additional $100 per year of annual matching funds would be available for deposits made by families, states, or philanthropists. The result could be significant: under the proposed program, children in EITC households would be eligible for up to $9,000 in EITC tuition assistance for post-secondary training, covering a majority, if not all, of tuition and fees for many students in EITC households. 13 d. Ensure that low-income families are not penalized for saving for college. In todays economy, its hard enough for families to make ends meet and still have money left over for long-term savings. To make matters worse, many states count savings held in 529 plans toward an individuals asset limit determining loan eligibility.14 Intended as a safeguard against better-off individuals receiving scarce resources, this can cause low- and moderate-income families to become ineligible for important social programs simply because they saved for college. Congress has already exempted savings held in 529 plans from the asset limit for the Supplemental Nutrition Assistance Program. 15 Now, Congress should extend this protection to other social programs to ensure that low-income families are rewarded for saving for college, while also ensuring that there are not loopholes that benefit wealthier families. e. Create a Pell Grant matching program. To attract top students, many colleges have increased the percentage of institutional aid dollars dedicated to merit-based aid, which disproportionately benefits wealthier students.16 This has put significant strain on those low-income students who rely only on need-based aid. A recent report from the New America Foundation found that 44 percent of the public colleges they studied, and an even a greater share of private colleges, charge low-income students a net price greater than $10,000 per year. 17 Congress can address this funding gap by requiring these colleges to match Pell Grants using institutional aid dollars. The matching requirement would be structured to ensure that it is sustainable for colleges with smaller endowments or larger percentages of students who receive Pell grants. f. Increase the maximum size of Pell Grants. Over the last several years, the Obama administration has made tuition assistance more generous, including increasing the maximum Pell Grant award by $905.18 The Pell Grant is central to making college affordable for low- and middle-income students, but even with recent changes, has failed to keep pace with tuition increases. We must

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Cory Booker, Strengthening Competitiveness, Ending Child Poverty, (June 2013), http://www.corybooker.com/vision/policy-papers/child-poverty. 14 Rourke OBrien, 529s and Public Assistance: Asset Limits as a Barrier to College Savings, New America Foundation, (November 2009), http://www.newamerica.net/publications/policy/529s_and_public_assistance. 15 Id. 16 In this report, low-income refers to students whose family income is less than $30,000. Stephen Burd, Kevin Carey, Jason Delisle, Rachel Fishman, Alex Holt, Amy Laitinen, and Clare McCann, Rebalancing Resources and Incentives in Federal Student Aid, New America Foundation, (January 29, 2013), http://newamerica.net/sites/newamerica.net/files/policydocs/NAF_Rebalancing%20Resources%20FINAL.pdf. 17 Id. 18 Education: Knowledge and Skills for the Jobs of the Future, The White House, (accessed September 19, 2013), http://www.whitehouse.gov/issues/education/higher-education.

increase the maximum size of the Pell Grant to ensure that it continues as a foundation for college affordability for years to come.

II. DRIVING DOWN THE COST OF HIGHER EDUCATION AND IMPROVING EFFICIENCY While we can do more to help families afford college, we must also control troublesome trends in tuition and other costs. Here in New Jersey and across the country, a massive spike in college enrollment has been met with steep cuts in state support. Since 2008, New Jersey higher education funding has been cut by more than 27 percent per student.19 In many cases, colleges have had to make up for these cuts by raising tuition. With higher education costs outpacing inflation, we can do more in New Jersey and across the country to reverse this trend by: a. Linking campus-based aid to college affordability and performance. Since 2008, 48 states have cut higher education funding, resulting in a 28 percent cut in state funding per student.20 Many colleges have gone to great lengths to avoid making up for funding cuts by transferring costs to students. As President Obama has proposed, we should reward those public and private colleges that successfully keep tuition down by increasing their funding for campus-based aid programs, such as Perkins Loans. At the same time, we should decrease funding for these programs at colleges that raise tuition without providing students more value. Incentives must be considered carefully; we must not unfairly punish colleges forced to raise tuition due to drastic state budget cuts. b. Disbursing Pell Grants in intervals to prevent waste. Between 2003 and 2008, federal and state governments spent over $9 billion on students that dropped out of college before their second year. 21 This underscores the ample opportunity to cut waste and enhance the effectiveness of the program. To minimize inefficient spending on Pell Grants, we should disburse funding in graduated intervals, rather than as a lump sum at the beginning of each semester. By doing so, no undue federal Pell Grant money will be disbursed for a student who withdraws from school midsemester. This reform should be implemented in a way that is sensitive to colleges and universities need to maintain budget stability. c. Increasing the graduation rate for students who receive Pell Grants. Our current Pell Grant program expands the maximum grant amount for which a student is eligible as he or she progresses in school. Seniors, for example, are eligible for a larger Pell Grant than freshmen. To incentivize graduation, we should further increase the maximum Pell Grant award for students nearing completion of their degrees. Additionally, we can encourage renewed focus on graduation by offering bonuses to colleges based on the number of Pell Grant recipients they graduate. d. Allowing Pell Grants to supplement a year-round higher education. Restoring the year-round Pell Grants that were cut in the 2011 budget deal would allow students with the greatest need to graduate more quickly. By funding summer classes, students could continue their studies, keep

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Phil Oliff, Vincent Palacios, Ingrid Johnson, and Michael Leachman, Recent Deep S tate Higher Education Cuts May Harm Students and the Economy for Years to Come, Center on Budget and Policy Priorities, (March 19, 2013), http://www.cbpp.org/cms/?fa=view&id=3927. 20 Id. 21 Mark Schneider, Finishing the First Lap: The Cost of First -year Student Attrition in Americas Four-Year College and Universities, American Institutes for Research, (October 2010), http://www.air.org/files/AIR_Schneider_Finishing_the_First_Lap_Oct101.pdf.

their work-study or local job without interruption, and reduce the costs of moving out of housing for the summer. III. PROVIDING FAMILIES WITH BETTER INFORMATION Deciding whether and where to attend college are some of the most important and expensive decisions a student and his or her family makes. Yet, each year, students consider these high stakes choices while relying upon word of mouth, misinformation, and limited data published by colleges themselves. We can help students make informed decisions by making readily available vital information, such as particular institutions graduates average future earnings and relevant data on debt burden. We should also streamline the application process for financial aid to ensure that students are able to take advantage of the resources that are already available to them. To increase transparency and make it easier to obtain financial aid, we should: a. Ensure that crucial information about colleges is publicly available. Under current laws, colleges are not required to publicly provide information relevant to school selection. As a result, applicants are often left in the dark in regards to colleges relative strengths and weaknesses. President Obama made great strides in improving transparency with his proposal for a comprehensive college scorecard to help aid student decision-making. Congress can further support this effort by passing the Student Right to Know Before You Go Act.22 The bill would require the Department of Education to publish data including how much graduates make in each major and graduation rates for non-traditional students. Transparency can help drive down rising tuition; lack of information about college performance can provide cover for colleges to raise tuition. It can also create a perverse incentive for colleges to raise tuition to signal that they provide more value than their peers.23 b. Streamline the Free Application for Federal Student Aid (FAFSA). No student should miss out on an affordable education because of an unwieldy and burdensome application process. But for many, the process of applying for financial aid is so complex that it reinforces the perception that college is out of reach. Evidence suggests that the complexity of the FAFSA processwith over 125 questionsis a significant hurdle for low- and middle-income students applying for financial aid. A 2004 study found that in the preceding year, an estimated 1.5 million students who would have been eligible for Pell Grant assistance did not fill out the required FAFSA. 24 In addition, 30 percent of full-time community college students from families with incomes under $50,000 chose not to complete the FAFSA, even though almost all of them would have qualified for at least some assistance. 25 The Obama administration has made important reforms to reduce the number of questions and web screens contained in the FAFSA. We must continue to make changes that streamline and simplify the FAFSA process. c. Educating students and families on college affordability. Nearly half of all high school students do not know how to finance a college education, let alone how to interpret their loan

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The Student Right to Know Before You Go Act of 2013, Office of Senator Wyden, (accessed September 29, 2013), http://www.wyden.senate.gov/download/bill-summary_student-right-to-know-before-you-go-act. 23 Andrew Gillen, A Tuition Bubble? Lessons from the Housing Crisis, Center for College Affordability and Productivity, (April 2008), http://www.centerforcollegeaffordability.org/uploads/Bubble_Report_Final.pdf. 24 Doug Lederman, 1.5 Million Aid -Eligible Students Dont Apply, Inside Higher Ed, (February 10, 2006), http://www.insidehighered.com/news/2006/02/10/fafsa. 25 Simplifying Student Aid: The Case for An Easier, Faster, and More Accurate FAFSA, National Economic Council, (September 2009), http://www.whitehouse.gov/assets/documents/FAFSA_Report.pdf.

agreements. 26 To increase public understanding, the federal government should provide incentives for school districts and not-for-profits to provide in-depth seminars to educate students about financing college, including available resources, processes, and relevant deadlines. This information will help students and families make more informed decisions about how to finance post-secondary education and ensure that they take on manageable levels of debt. IV. PROMOTING POST-SECONDARY EDUCATION OPTIONS We must recognize that the higher education landscape and the demands of the global economy are changing. With more than 40 million college-educated baby boomers nearing retirement or retiring by 2020, the United States must produce enough educated workers to take their place. 27 To ensure that a post-secondary education remains affordable and responsive to the needs of the 21st century economy, a variety of educational choices must be provided. Community colleges, vocational and tech schools, and online courses can often meet student demand at lower cost. We should: a. Restore funding to community colleges. Tuition rates at community colleges average less than one-third those of public four-year institutions.28 With many of the fastest growing occupations in fields that require associate degrees or certifications, community colleges and other two-year institutions can offer a better value for many students and families. However, the federal government, through sequestration, is making this education less affordable. Sequestration cuts $37 million in Supplemental Education Opportunity Grants, which provide vital tuition assistance to many community college students.29 The federal government should be doing more, not less, for these critical but underfunded institutions and the students who attend them. b. Promote vocational and other skills-based post-secondary education. In a 2011 Wall Street Journal op-ed, the CEOs of American Express and General Electric expressed concern about the skills gap of workers in the United States: there are more than two million open jobs in the United States, in part, because employers cant find workers with the advanced manufacturing skills they need. 30 The value of a post-secondary education is largely contingent on the students ability to practically apply their degree upon graduation. Indeed, vocational degrees are more affordable than traditional four-year programs and provide an alternative for students who seek a more technical career. This campaigns manufacturing policy paper proposed creating a national certification system for advanced manufacturing skills that would provide clear standards and help employers make effective hires. Vocational schools, as well as community colleges, can structure their curricula to teach these skills. This competency-based approach would provide students with a more affordable path to a good-paying job and reward students who learn new skills outside the classroom.
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National Survey: Half of U.S. High School Seniors Dont Understand the Cost and Terms of College Student Loans, Credit Union National Association, (April 22, 2013), http://www.cuna.org/Stay-Informed/PressRoom/2013-Press-Releases/National-Survey--Half-Of-U-S--High-School-Seniors-Don%E2%80%99T-Understand-The-Cost-And-Terms-Of-College-Student-Loans/. 27 Skills for Americas Future Community College Facts, The Aspen Institute, (accessed September 22, 2013), http://www.aspeninstitute.org/policy-work/economic-opportunities/skills-americas-future/what-we-do/communitycollege-facts. 28 Sandy Baum, Jennifer Ma, and Kathleen Payea, Trends in Public Higher Education: Enrollment, Prices, Student Aid, Revenues, and Expenditures, College Board Advocacy & Policy Center, (May 2012), http://advocacy.collegeboard.org/sites/default/files/12b_5303_PubHighEd_AnalysisBrief_WEB_120530.pdf. 29 Educators Say Community College Need Support, Not Cuts, Education Votes, (May 1, 2013), http://educationvotes.nea.org/2013/05/01/educators-say-community-colleges-need-support-not-cuts/. 30 Jeff Immelt and Ken Chenault, How Were Meeting the Job Creation Challenge, Wall Street Jou rnal, (June 13, 2011), http://online.wsj.com/article/SB10001424052702304259304576380323311523538.html.

c. Properly regulate for-profit colleges and universities. There is no refuting both the demand for alternative forms of post-secondary education and the value that these alternative forms have provided to many students. Between 1998 and 2008, enrollment in for-profit colleges and universities tripled, and today, 13 percent of all students enrolled in post-secondary education attend a for-profit institution.31 Notably, for-profit institutions often educate those students that are underrepresented at nonprofit colleges, including minorities, older individuals, and veterans.32 In addition to massive enrollment and rapid growth, any discussion of for-profit institutions must include the considerable role of the federal government. A study found that for-profit colleges and universities received $32 billion in federal financial aid in 2009, representing 79 percent of revenues for the companies they examined. 33 Given the significant federal financial stake, broad concern regarding potentially misaligned incentives, and allegations of misleading advertising towards groups such as military personnel, we must ensure that they are responsible stewards of student investment of time and resources, and of federal funding. To this end, we must redouble efforts to identify and prosecute cases of fraud and abuse. Furthermore, we should examine which metrics promote desired educational and professional outcomes, and consider tying them to the amount of federal aid these institutions are eligible to receive.34 d. Explore hybrid learning through MOOCs and other online instruction. The introduction of online offerings, including Massive Open Online Courses (MOOCs), can help students access vast amounts of information previously beyond their reach. Online instruction has the potential to not only to diversify a students education, but also to lead to major cost savings at universities. Additionally, if MOOCs and other online educational organizations partner with companies to build relevant course materials, the amount of time a student needs to spend earning a postsecondary degree can be compressed, thus decreasing student costs. While important questions remain to be answered, particularly related to credentialing, cost, and access, the government should be a strong partner of educational institutions as they experiment with online technology.

CONCLUSION Following World War II, with the global economy in shambles, America rose to the challenge and provided returning soldiers with unprecedented access to post-secondary education. The Greatest Generation used that education to start businesses and invent technologies that created a thriving middle class unlike any seen before. But we seem to have forgotten what investing in access to higher education brought those individuals and our entire society. For many hardworking students today, higher education, a well-trodden path to the middle class, lies just out of reach. Soaring tuition, underfunded loan programs, and Washington gridlock combine to keep thousands of students from pursuing post-secondary education. And for those who do manage to earn a college degree, lingering student debt restricts career choice and limits social mobility. We must renew our commitment to making access to quality, post-secondary
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Tamar Lewin, Senate Committee Report on For-Profit Colleges Condemns Costs and Practices, New York Times, (July 29, 2012), http://www.nytimes.com/2012/07/30/education/harkin-report-condemns-for-profitcolleges.html?pagewanted=all. 32 Judah Bellin, The Unacknowledged Value of For-Profit Education, The Manhattan Institute, (April 2013), http://www.manhattan-institute.org/html/ib_20.htm#.UkpCWbyE6PU. 33 U.S. Senate Health, Education, Labor and Pensions Committee, For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success, (July 29, 2012), http://www.help.senate.gov/imo/media/for_profit_report/Contents.pdf. 34 On September 9, 2013, the U.S. Department of Education began the rulemaking process to set minimum gainfulemployment rules for vocational programs eligible for federal financial aid. For-profit, vocational programs will have to adhere by these standards once set.

education a reality for all Americans. Our economic competitiveness and the very character of our nation depend upon it.