Financial Aid Is Crucial for Higher Education

by Sue McMillin
Some math is easy: Over a lifetime, a college graduate will earn about $1 million more than a high school graduate. Financing college? That’s another story...

There is little doubt that the future economic well-being of America hinges greatly on a large portion of the population completing a higher education. Over a lifetime, a college graduate will earn about $1 million more than a high school graduate.

Tomorrow’s teachers, scientists, doctors, lawyers, as well as business and technological entrepreneurs, are facing greater odds in finding the money to pay for a college education.

More than ever, today’s college students rely on the federal student loan programs—collectively the third largest government entitlement program behind Social Security and Medicare—which have been undergoing vast changes. The funding mechanisms employed to make money available to college students have been strained, but Congress and the U.S. Department of Education have worked to ensure that there is enough capital to meet short-term needs.

However, that is not nearly enough. Total cost of attendance for both public and private institutions has increased dramatically in the last decade, and federal loans and grants have not kept up with all the added costs, although the amount of federal loans increased by 107 percent during the same period.

That means that many parents and students must resort to paying for college through more costly private loans, which grew by 379 percent from 1997 to 2007. However, for most people, private loans are a way to augment federal loans, which is far and away the biggest source for college money.

And while private loans constitute only a small fraction of the $70 billion borrowed for college each year, they pose a risk for many students. Today, the average private loan debt for a recent college graduate is about $42,000, while average indebtedness for all graduates is about $20,000.

In Texas, a demographically diverse state, there are added challenges to providing access to college for students. The state has embarked on an ambitious Closing the Gaps initiative that aims to enroll 630,000 more students in Texas colleges and universities by 2015. However, the state of Texas has to do more in the way of state grants and scholarships to have a realistic chance of meeting this goal. A study conducted for the Texas Legislature last year showed that as many as 47,000 college-prepared high school graduates were unable to enroll in college because of fi nancial barriers.

There is another statistic that shows that Texas lags behind in the amount of money it provides for students to attend college. Nationally, about half of these students rely on federal loans and grants to help pay for college; in Texas, the percentage is about two-thirds.

A report by the Independent Colleges and Universities of Texas (ICUT) also indicated that costs are growing at a faster pace for students than financial aid in general. ICUT’s report found that the cost of attending Texas’ private institutions grew by 7.2 percent between the 2005–2006 and 2006–2007 academic years, yet financial aid from all sources had increased by only 1.2 percent, and federal aid had actually decreased by 6.9 percent. If that trend continues, it could erode Texas’ status as a low-cost higher education state —especially for students attending four-year private schools.

For the first time in years, Congress has finally helped students by reversing a trend in funding for federal student aid programs. Need-based Pell grants have been increased, and the amount that students can borrow also has been increased and interest rates lowered.

Students and families will continue to rely on federal aid to pay for a college education, so it is imperative to bolster and fully fund grant programs. There is also growing consensus that states and institutions of higher education must do more to ensure students have access to colleges and universities. Many schools are responding either by providing more grants and scholarships to deserving students, or by lowering tuition costs for those from low-income families.

The United States needs to continue to prosper, and it can only do so by investing in higher education. But in the end, government cannot be totally responsible for this investment. Private and institutional contributions have to also be part of the collaborative effort to make college more affordable, and to sustain current and future generations of students.

Sue McMillin is the President and CEO of Texas Guaranteed Student Loan Corporation and a member of Southwestern’s Board of Visitors.

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