Over the last decade, the affordability of a university education has become a more pressing problem that ever before. Net Tuition has climbed 12 percent, while median household income has declined 6 percent. Student debt has increased to $1.2 trillion, a number higher than all credit card debt combined. Certainly this is not a sustainable pattern for the vast majority of schools—specifically schools without huge endowments.
How did we get here? At the conclusion of World War II and the Korean War, millions of soldiers returned home. Remember, the Great Depression was still fresh in the minds of the public and private sectors. Stock values would not return to 1929 highs until 1952. The war effort had created millions of temporary jobs, but now the war was over, and there was deep concern that if the returning soldiers were set loose to look for jobs, we would return to high unemployment and chances of a shock to the economy leading to another depression or severe recession.
To combat this possibility, Congress passed a bill that made perfect sense under the circumstances. Send the soldiers to college to learn skills and then gradually return to the job market. This was the GI Bill of 1944. The great colleges and universities were in place and there were plenty of seats at most.
The GI Bill was a law that provided a range of benefits for returning veterans. Benefits included cash payments of tuition and living expenses to attend university, high school or vocational schools, as well as one year of unemployment compensation for those who had served during the war years for at least 120 days and had not been dishonorably discharged; combat was not required.
By 1956, roughly 2.2 million veterans had used the GI Bill education benefits in order to attend colleges or universities, and an additional 5.6 million used these benefits for some kind of training program. In the mid ’60s and early ’70s, colleges and universities dug very deep into their own pockets to provide grants and other forms of student financial aid in partnership with the new federal programs.
The GI Bill was a major success and the huge increase in the workforce was instrumental in speeding up economic growth, which remained historically high through the end of the 20th century. The only question was how fast colleges could expand facilities and how fast we could create colleges.
The Higher Education Act of 1965 was established to govern federal student aid including all federal student loans and grants. It has since been reauthorized multiple times by different administrations, but it was the 1992 reauthorization of the Higher Education Act that set into motion the influx of students and created the modern day mess of admissibility and affordability.
The GI Bill was a major success and the huge increase in the workforce was instrumental in speeding up economic growth, which remained historically high through the end of the 20th century. The only question was how fast colleges could expand facilities and how fast we could create colleges.
The act changed the formula for Expected Family Contribution (EFC), thus increasing federal grants and made federal loans much easier to obtain, including, for the first time, the unsubsidized federal loan. So the 1990s represented a period of strong economic growth, reasonable federal balance sheets, and the federal and state governments could subsidize the universities through student grants and student loans.
So What Went Wrong?
As university endowment funds grew and university expenses to operate and provide solid educations were well under control, universities began to compete aggressively for students. Elite universities like Harvard, Stanford, and others on the top of the various questionable rating systems had no problem admitting students without factoring in need, as their multibillion-dollar endowments provided generous grants for the middle-class and poor. Getting into any Ivy League school or other elite private colleges with a huge endowment and having a family income of less than $60,000 meant you could pretty much expect a free ride.
