Is college affordable, and for whom?

Publish Date
October 15, 2019

The state of Minnesota invests heavily in higher education, both through our appropriations for need-based aid, and financial support for our public colleges and universities. Despite these investments, no good measure exists of whether or not these investments are making college more affordable, and for how many. How can we define college affordability?  

College could be considered affordable for families able to write a check to cover all costs, as well as for those with a family income so low that 100% of their costs are covered by state and federal aid. A broader sense of affordability could be that you leave college with manageable debt, and your education helps you secure a job with a paycheck that makes those loan payments manageable.

Or is college affordability defined by a student’s career goals? A two-year community college is affordable, but what if a public research university best fits the student’s needs and aspirations? Without adequate resources, the student may not be able to attend this public four-year college.  

State policymakers must look at college affordability through a broader lens — are we investing enough taxpayer dollars to extend opportunities for college enrollment and success to enough students? How many is “enough”? And is the percentage of income and assets required from families and students reasonable or too burdensome?

In 2018, the Minnesota Office of Higher Education (OHE) began the task of defining affordability, both for students and state lawmakers. This work will culminate in the development of guiding metrics to set goals for future financing for both system appropriations and financial aid.

For families and students, defining college affordability should be about the math — are you able to purchase the necessary and appropriate education and at the same time have enough money to cover essential needs such as food and housing? If the math doesn’t work, the student is at an increased risk of dropping out or may simply not enroll.

For the state, affordability should take into account, by income, the share of individuals who can afford to enroll. In this calculation, limited state resources and political will are in competition with the growing need for educated workers and the value of investing enough to encourage completion, not just enrollment.

For individuals and the state, affordability is measured over time — when a student begins their education, over the student’s lifetime, and during the loan repayment time.

Affordability at the student’s entrance asks this question: Does the student have the required level of resources to fully pay the cost of attendance on day one? If the cost of attendance exceeds their resources (which include grants, work, family contributions, and loans), that college choice is not affordable for that student. It is critical that this measurement is based on a reasonable number of hours the student must work, as well as a reasonable family contribution, and student loans. If these three factors don’t align, the student may be able to go to college, but they are less likely to complete and if they do, are more likely to have unmanageable debt.

On the other hand, if resources exceed the cost of attendance, this could indicate that the state is not being efficient in using state resources. This is a moving benchmark that must be reconsidered as costs or resources change.

In the Minnesota Office of Higher Education’s view, state affordability is achieved when:

  • A typical family can afford 50%+ of educational options available to them, and
  • A typical family can afford 50%+ of local educational options available to them (colleges near where they live).

Over the student’s lifetime, the return on investment for students and families can best be measured by comparing their net earnings after college that can be attributed to their education, to the net cost of their education. For students, ideally, the net earnings over the first 10 years post-college would exceed the net cost of college — a positive return on investment.

There are areas of study where there is less likely to be a positive return on investment, such as for early childhood educators, legal aid attorneys, and culinary workers. In this case, state policymakers might want to weigh the demand for occupations such as these and consider additional subsidies or alternative training modules to make them more affordable.

Finally, affordability of college should be measured by the cumulative debt burden a student carries after college, measured by the percentage of income required to fully pay off their debt in 5-10 years. If the percentage of income is too high, the borrower is at risk of default, in which case, college cannot be considered affordable for that student. However, the state’s impact on student borrowing is less direct. Students and families decide when to borrow and how much to borrow within federal guidelines and private borrowing options available to them.

To have the most significant impact, state policy decisions must focus on the first measure, affordability at entry. If this is achieved, a positive return on investment is much more likely, as well as a manageable debt burden. The challenge to states in ensuring that students have adequate resources on day one is to understand which students currently do not.

Undoubtedly, the information gathered from a detailed state-level analysis of affordability metrics will be humbling, but it also should inspire us to meet the very real and growing challenge of college affordability. Organizations such as SHEEO, and its member states and postsecondary systems, work to meet this challenge and, collectively, we are making a real difference.