Written by Sophia Laderman and David Tandberg
Elizabeth Warren’s proposal for universal free college and student loan debt cancellation has brought increasing federal attention on college affordability and student debt. Warren’s proposal follows numerous calls for free college and several reports from higher education advocacy organizations. In 2017, SHEEO published a white paper on A Federal-State Partnership for True College Affordability, proposing that the federal government and states work together to address the rising price of college. The central argument in this paper is that the gap between what many students can pay and what institutions charge has become so large that state and federal governments must share the burden of reversing the dramatic increase in the price of college to effectively address college affordability.
SHEEO proposes a federal-state partnership to help states reach affordability goals. This forward-looking measure of college affordability focuses on ensuring that college is reasonably affordable for low-income students: where students devote no more than 10% of their post-graduation discretionary income toward student loan repayment (SHEEO’s affordability threshold). Such a proposal would address the inequitable proportion of total household income that lower-income families are expected to spend on higher education (Figure 1).
The federal-state partnership proposal adds to existing financial aid allocations from all sources in each state. The model proposes a federal-state matching framework, in which targeted federal dollars match additional state investments in higher education. These matching funds would appropriately motivate states to prioritize investments in higher education, especially for underserved populations. To achieve the reasonable college costs to students outlined in the SHEEO affordability framework, we estimate it would cost an additional $34 billion per year, evenly split between state and federal support for higher education. Eliminating the cost of tuition and mandatory fees for all students attending public 2- and 4-year institutions would cost about $46 billion (SHEEO calculations).
On average, if federal matching funds were secured, states would need to increase total educational appropriations 5% each year for four years to meet the SHEEO affordability threshold. A combination of increased need-based financial aid and increased appropriations to institutions would be needed to meet the affordability threshold. While there is wide variation in current levels of state support across the states, SHEEO’s estimates reveal that nearly every state must do more to ensure affordability. With each passing year, more and more students are being priced out of postsecondary education. At the same time, state recovery in post-recession educational appropriations has stagnated, and for the first time since the Great Recession, in 2018, general operating appropriations per student did not keep up with the rate of inflation.
Decisive action is needed to address college affordability as entire populations are increasingly being forced to choose between foregoing college or taking on substantial debt. Such sweeping action is beyond the reasonable capacity of any one entity. However, acting together, a new federal-state partnership would provide the resources and focused attention needed to ensure the next generation has every opportunity to pursue their educational aspirations regardless of their ability to pay. SHEEO’s proposal accepts that states vary greatly in how far they need to go to ensure college affordability for low-income students, due, in large part, to current and historic funding levels and the size and design of state financial aid programs. The federal-state partnership meets states where they are, empowering them to focus additional resources on those students who need them most. In order to remove equity gaps and recapture the American Dream, we must consider programs with the large scope and impact of a federal-state partnership for true college affordability.
