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FAST FORWARD:

AFFORDABILITY IN FOCUS

MARCH 2016

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Last year 55,000 Degrees partnered with KentuckianaWorks to release Fast Forward, a report on the Louisvi l le region’s education and workforce ecosystems. In the report we laid out strategies that are key in accelerating the city’s progress toward our goals and growing our educated workforce. We also identi f ied potential obstacles and cal led for an al l -hands-on deck effort in order to close the gap between current progress and the progress needed to reach our 2020 goal.

Our role in that effort is continuing to engage the community and helping start conversat ions that lead to impact in the community. This br ief report, Affordabi l i ty in Focus, is our way of doing that. This is the f i rst in a ser ies of issue br iefs that 55,000 Degrees wi l l release in 2016 designed to take a deeper dive into key issues raised in the Fast Forward report and summit. We hope that these br iefs wi l l spark dialogue and act ion to move us c loser to our goal .

FAST FORWARD:AFFORDABILITY IN FOCUS

By Matt Berry, Ph.D. and Michael Kennedy

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A MODERN PARADOX

A col lege educat ion is essentia l in the 21st century.

Col lege is too expensive.

I f both of these statements are true, as some data suggest, what is the impact on our community?

On the one hand, earning a degree or credential past high school has never been more cr i t ical . In Kentucky more than 60 percent of jobs wi l l require a postsecondary degree by the year 20201. And r ight here in Louisvi l le 75 percent of family-support ing jobs projected to be added over the next ten years wi l l l ikely require some form of postsecondary educat ion2.

On the other hand, the pr ice of earning a degree has never been higher. National ly, the average tuit ion and fees charged by four-year publ ic inst i tut ions have more than tr ipled in three decades. And in that same t ime tuit ion and fees at publ ic two-year schools have more than doubled4.

Students and famil ies across the nat ion are feel ing the tension between these two real i t ies.

In a 2015 pol l , 96 percent of Americans agreed that i t is somewhat or very important to have a degree or professional cert i f icate past high school. In that same survey, though, 79 percent of respondents said they don’t bel ieve educat ion past high school is affordable for everybody in this country who needs i t 5.

That push and pul l so many people are feel ing, between the importance of col lege and i ts r is ing pr ice, is hitt ing home. Last year, a Gal lup Pol l found that 73 percent of parents are anxious about how to pay

col lege tuit ion – making col lege costs their #1 f inancial concern, over ret i rement savings or unexpected medical bi l ls6. And now, 60 percent of current col lege students say they are stressed about having enough money to pay for school7.

But how worr ied should people be? Is col lege real ly too expensive?

High School or Less

Certificate or Apprenticeship

3/4 of New Family Supporting Jobs Will Require Postsecondary Education

Associate’s

Bachelor’s

Master’s

Professional or Doctoral

3/4 of New Family Supporting Jobs Wil l Require Postsecondary Education3

9 in 10 Americans bel ieve it ’s important to have education past high school

8 in 10 Americans don’t bel ieve education past high school is affordable for al l who need it

Americans Think College is Important; Unaffordable for Some

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IS COLLEGE TOO EXPENSIVE?

Without a doubt the pr ice of col lege, what inst i tut ions charge annual ly in tuit ion and mandatory fees, is higher than ever before. Since the mid-1970’s average tuit ion and fees at four-year col leges in the US has r isen 193 percent whi le the pr ice at two-year schools has grown by more than 100 percent4. In fact, tuit ion rose so aggressively that in the last thirty years, the pr ice of col lege has r isen faster than other major goods categories l ike energy, food, housing, and medical care8.

Closer to home, the pr ice of col lege has r isen just as dramatical ly. Since the beginning of the recession in 2008, average in-state tuit ion and fees at Kentucky publ ic inst i tut ions has r isen by 32 percent9 – one of the largest increases in the nat ion.10 And the story has been s imi lar here in Louisvi l le with a 31 percent increase in average tuit ion and fees at our local four-year inst i tut ions and a 25 percent increase in the pr ice of publ ic two year col leges.11

$3,000

$6,000

$9,000

$12,000

$15,000

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

$4,962$5,410

$8,226

$11,400

$14,561

$3,370$2,746

$2,248$1,686$1,655

All 4-Year Institutions

All 2-Year Institutions

Average tuit ion and mandatory fees 2014 constant dol lars for al l 4-and 2-year inst i tut ions in the US, 1973-2013

Sticker Price of College Rising for Decades

$5,000

$10,000

$15,000

$20,000

$25,000

2014

2013

2012

2011

2010

2009

2008

$2,934$3,664$3,280

$18,786

$21,408

$16,295

Local 4-Year Institutions

Local 2-Year Institutions

Average in-state tuit ion and mandatory fees for local 4-year non-prof i t inst i tut ions and 2-year publ ic inst i tut ions

Sticker Price Rising Local ly as Well

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When looking at these numbers i t becomes easy to understand why people are nervous and the answer to the quest ion of whether col lege has become too expensive seems to be a resounding “yes!” But there are two important considerat ions to the answer. First , pr ice matters only in the context of pay-off , and we discuss that later. But also, price is a very di fferent thing than cost . The r ise in tuit ion and fees represents only the “st icker pr ice” of col lege, not the actual cost to students.

That dist inct ion provides a more posit ive out look.

A better way to measure the real cost of col lege to students is through “net pr ice.” Essential ly, this is what students pay once scholarships and grants are deducted from the total cost of attendance; which includes things l ike transportat ion, food, and housing costs as wel l as tuit ion and fees. By looking at net pr ice, students and famil ies get a better sense for the true cost of attending an inst i tut ion.

Looking at net pr ice shows that, not only do affordable options st i l l exist , but in some cases earning a degree has become even more affordable in recent years. In fact, thanks to increases in Federal Pel l Grants, the average net pr ice at local publ ic two-year schools has actual ly gone down s ince 2008!13

So whi le the st icker pr ice of col lege may be r is ing at an alarming rate, i t is important to understand that tuit ion and fees are only a part of the total cost of attendance. Even more important, when looking at the whole picture, there are clear ly st i l l affordable options left for those wishing to pursue a postsecondary educat ion.

Private for-profit 4-year-or-above institutions

Private not-for-profit 4-year-or-above institutions

Private for-profit 2-year institutions

Public 4-year-or-above institutions

Public 2-year institutions$6,565$4,052

$10,617

$13,958$7,817$21,775

$19,399$5,012$24,411

$23,083$20,680$43,763

$21,765$7,266$29,031

Net PriceGrants/Scholarships Total Cost of Attendance

Local Sticker Price Versus Net Price

Annual Average Grants and Scholarships, Net Pr ice, and Total Cost of Attendance at Local Inst i tut ions, 201412

Net Price Has Dropped at Local Two-Year Public Colleges

Average Net Pr ice at local 2-year inst i tut ions, 2008 – 2013.

$2,000

$4,000

$6,000

$8,000

2013 - 142012 - 132011 - 122010 - 112009 - 102008 - 09

$7,600

$6,004$6,643 $6,553 $6,711 $6,565

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THE INVESTMENT STILL PAYS OFF

Let’s be very c lear. Even with the cost of col lege r is ing, a degree is , unequivocal ly, st i l l worth the investment.

A recent analysis by the Federal Reserve Bank of New York showed that the wage premium of a col lege degree, that is the extra wages earned with a degree as compared to what someone could earn without one, is near an al l - t ime high. Just in the last decade, even as the pr ice of an undergraduate educat ion has r isen, the rate of return on investment (accounting for opportunity costs of enrol lment) for both an associate and bachelor’s degree has been about 15 percent.14

Even beyond the individual economic benef i t , Kentuckians with a postsecondary degree tend to have higher rates of employment, lower rates of incarcerat ion, improved health outcomes, and decreased rel iance on publ ic assistance programming.15

In very concrete terms the benef i ts of earning a degree st i l l far outweigh the costs.

But how loudly is that message gett ing through?

IS THE MESSAGE GETTING THROUGH?

Unfortunately, i t seems l ikely that the r is ing pr ice of col lege – or at least the perception of i t – has had an impact on col lege-going. We are seeing the effects of that r ight here at home. Since 2010, undergraduate enrol lment at local postsecondary inst i tut ions has fa l len by 12 percent which reversed a long upward trend in enrol lment in our region and across the state of Kentucky.16

What is part icular ly concerning is that the decl ines are steepest among populat ions who have the most to gain f rom the wage premium of a col lege degree. In a t ime of r is ing inequal i ty, postsecondary educat ion is key to social mobi l i ty. I t is extremely concerning, for example, to see that local Afr ican-American enrol lment has dropped by 18 percent s ince 2010.16

Without a doubt, other factors are at play and r is ing tuit ion cannot bear al l the blame for enrol lment decl ines. An improving economy, for example, br ings more jobs and, tradit ional ly, fewer people enrol led in community col leges17 where we have seen much of the drop off local ly.

10,000

20,000

30,000

40,000

50,000

60,000

70,000

WhiteHispanicAfrican-AmericanTotal2010 2012 2013 2014

-12%

-18%

+14%

-13%

2011

Fal l undergraduate enrol lment by race/ethnicity at local postsecondary inst i tut ions, 2010 - 2014

Rising Costs Bring Lower Local Enrol lment?

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But as enrol lments continue to shr ink i t is hard to imagine that the high cost of tuit ion isn’t dr iv ing at least some potential students away.

In an era in which higher educat ion is a necessity to economic and social mobi l i ty and prosperity, losing even one student because they bel ieve they can’t afford a higher educat ion should be deemed unacceptable.

HOW ARE STUDENTS AND FAMILIES ADAPTING?

Even as fewer students are enrol l ing, mi l l ions of people across the United States and tens of thousands in our community are pursuing a col lege educat ion r ight now. With such a dramatic upswing in the pr ice of col lege and stagnant wages18 not keeping up, how are they doing i t? Part of the answer, increasingly, is through loans.

At four-year inst i tut ions in Kentucky more students are graduating with debt and with a larger amount of debt than ever before. Just in the f ive years of avai lable data between 2008 and 2013 the average amount of graduates’ debt increased by 36 percent. And in that same t ime the percent of graduates with loan debt went f rom just over one hal f to near ly two thirds.19

But are loans necessar i ly bad? Considering the myriad benef i ts and consistent ly high return on investment to a col lege degree, maybe a personal stake in that investment is just i f ied. Today’s students are less able to work their way through col lege than generat ions past20, but they are st i l l able to invest in their own educat ion through many sources of f inancial a id; including loans. And as a recent report21 by the Kentucky Counci l on Postsecondary Educat ion shows, the returns Kentucky graduates see on that investment tend to be enough so that they are able to meet repayment obl igat ions; even ear ly in their careers.

Whether loans are just a part of personal investment in one’s own educat ion or not, the burden of debt is taking i ts tol l on many graduates. According to a recent nat ional study, 63 percent of young Americans with student debt said their debt affected their abi l i ty to make larger purchases such as a car, 73 percent said they have put off saving for ret i rement and 75 percent indicated that student loan debt affected their decis ion or abi l i ty to purchase a home.22

So as students are feel ing the weight of the cost of col lege7 i t is di ff icult not to view the r is ing pr ice of a col lege educat ion as a barr ier to reaching goals; both for individuals and for our community.

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

20132012201120102009200830%

35%

40%

45%

50%

55%

60%

65%

201320122011201020092008Average Debt Percentage of Graduates with Debt

$19,

112

$19,

374

$22,

287

$23,

785

$24,

693

$25,

93954%

58%60%

62%59%

64%

Loans are Bridging the Gap Across Kentucky

Average debt of baccalaureate graduates f rom Kentucky four-year univers i t ies and percent of graduates with debt

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THE BOTTOM LINE ON AFFORDABILITY

In Fast Forward , a report on workforce and educat ion that we released joint ly with KentuckianaWorks in December, we began by asking a s imple quest ion: “what does i t take to support a family?” A very s impl i f ied vers ion of our answer: good jobs. The real i ty is that the good jobs of the future wi l l increasingly require training and educat ion past high school. That is as true in Louisvi l le as i t is in the rest of the United States and i t ’s one of the many reasons that 55,000 Degrees continues to work toward a community goal of reaching 50 percent of our adult working-age populat ion with an associate degree or higher by the year 2020.

In Fast Forward we not only la id out strategies to accelerate our progress toward that goal but we also identi f ied barr iers we would have to overcome along the way; including the cost of col lege. This br ief is a way to start understanding how we might do that. What we have learned is this :

• The “st icker pr ice” of col lege has r isen dramatical ly and is affect ing the real i ty and more important ly, the perception of postsecondary educat ion as affordable.

• Col lege can st i l l be affordable. In fact, the average net pr ice at local publ ic two-year col leges has gone down since the start of the recession in 2008.

• Col lege, now more than ever, is worth the investment. The jobs of the future wi l l require postsecondary educat ion to a larger and larger degree, in addit ion to the individual and societal benef i ts that come with a postsecondary degree.

We need more people, not fewer, enrol l ing in col lege. Not only do we need col lege-educated talent to f i l l the jobs of the future but we need more people to enjoy the benef i ts of earning a degree. Benef i ts of earning a degree l ike higher l i fe t ime earnings, lower rates of unemployment and incarcerat ion, better health outcomes, higher c iv ic engagement, and greater social mobi l i ty don’t stay with the individual ; they impact our communit ies and make them stronger.

THREE KEYS TO CLEARING THE HURDLE

The pr ice and cost of col lege is current ly a hurdle in the progress toward our community’s goals and, unfortunately, there is l i t t le reason to bel ieve some of the troubl ing trends we report here wi l l change in the near future. But that doesn’t mean there is nothing to be done.

1. INCREASE KNOWLEDGE AND AWARENESS — Understanding col lege affordabi l i ty is t r icky at best and we have st i l l only scratched the surface of i t here. That is why community members, parents, f r iends, and even students should arm themselves with as much knowledge as possible about strategies to make col lege affordable.

A good place to start is the Col lege Scorecard from the U.S. Department of Educat ion where key data about costs, f inancial a id, debt, and earnings after graduation are reported for thousands of col leges. I t a lso provides important performance data about col leges such as their graduation rate, which impact total cost of a degree. In Kentucky the Kentucky Higher Educat ion Assistance Authority provides a wealth of resources for f inancing col lege. Other sources of information l ike the Kentucky Center for Educat ion and Workforce Stat ist ics and KentuckianaWorks can help map majors to possible careers and assist students in making more informed decis ions, weighing cost and debt vs l ikely salary.

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We also need better mentor ing and col lege and career coaching at the secondary and postsecondary levels. Those of us who have navigated col lege must also be better teachers. Students should know what i t wi l l take to pay for col lege and what they can expect when they f in ish their degree. Financing a col lege educat ion is not easy and, with the mixed messages they receive, famil ies need al l the help they can get in navigat ing the terrain.

2. DEMAND BOTH INVESTMENT AND CURTAILMENT OF COST INCREASES — An undeniable, i f pol i t ical ly sensit ive, fact is that states have pul led back their investment in higher educat ion in recent years. Kentucky, for example, has cut i ts spending per student by 28 percent s ince 200823 and is one of only three states in the US to continue doing so in each of the last two years.10 This has had a direct impact on inst i tut ions and has shi f ted the burden of investment away from the state and onto individuals and famil ies. Just look in the graph below how this shi f t has taken place in Kentucky – students and not the state are now providing the l ion’s share of inst i tut ional revenue, per ful l - t ime equivalent student (FTE). 23 I f we bel ieve that higher educat ion is t ruly the path to prosperity for our community then we should demand that our state support those goals through investment and not continue the deep cuts that have already rocked our system.

Shr inking state investments, however, are not the only dr iver of r is ing costs. Higher educat ion inst i tut ions themselves bear some of the burden. Whether i t ’s the r ise in the number of administrators on campus24, higher executive salar ies25, the boom in campus improvements26, or s imply a react ion to the avai labi l i ty of more federal dol lars27, inst i tut ions themselves have played a role in r is ing tuit ion. Publ ic pol icy solut ions, l ike the performance funding conversat ions happening now in Kentucky, wi l l l ikely play a role in reining in costs. Innovat ions l ike the onl ine competency-based educat ion programs being offered through Commonwealth Col lege and promising new uses of predict ive analyt ics being seen at inst i tut ions across the country could be helpful tools in revers ing the trend. But as we demand more investment f rom the state, we should also be honest in demanding that our higher educat ion inst i tut ions acknowledge their role in this chal lenge, work to increase their eff ic iency, and do what is in their power to offer an affordable educat ion.

Net General Fund per FTE Tuition and Fee Revenue per FTE

$3,000

$6,000

$9,000

$12,000

$15,000

$18,000

20132012201120102009200820072006200520042003

$8,313 $8,027 $8,256 $8,261 $8,112 $7,495 $6,971 $6,589 $6,188 $5,948 $5,804

$6,117 $6,802 $7,212 $7,821 $8,118 $8,538 $8,732 $8,930 $9,252 $9,799$9,887

Tuit ion revenue and net general fund per ful l - t ime equivalent student, Kentucky Publ ic Postsecondary Educat ion System

Kentucky is Pul l ing Back and Students are Stepping Up

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3. PULL TOGETHER AS A COMMUNITY — At 55,000 Degrees we have been looking for options to address the growing concern over the cost of col lege. This has included explor ing promise scholarships and other “free col lege” options. I t has also included the development of Degrees Work which was designed to help adults navigate and return to school whi le taking advantage of and gett ing credit for their wealth of experiences. We have had discussions about expanded dual credit and apprenticeship options and promoting exist ing programs l ike Metropol i tan Col lege, Rotary Promise Scholarships, and the Family Scholar House. Most recently we met with Say Yes to Educat ion, an organizat ion which provides promise scholarships to local high school graduates in addit ion to a host of wrap-around student services, to explore the possibi l i ty of Louisvi l le becoming the next Say Yes ci ty. This would mean that each one of our local publ ic high school graduates would have the opportunity to have tuit ion ful ly covered at part ic ipat ing col leges to which they are admitted.

These processes are long and diff icult but our community needs “game-changers” and a true community effort can make this a real i ty. Just as we need an al l -hands-on-deck-effort to continue pushing for greater access and better outcomes for al l the students in our community we need to work together to el iminate the barr ier of cost for our students of today and our students st i l l to come.

I f you are interested in joining this discussion or learning more about 55,000 Degrees please vis i t our website www.55000degrees.org and make a Count Me In! pledge to show your commitment to this cause!

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REFERENCES AND TECHNICAL NOTES

1. Carnavale, Smith, & Strohl , Recovery: Job Growth and Educat ion Requirements through 2020. Georgetown Center on Educat ion and the Workforce, 2013.

2. KentuckianaWorks analysis based on data from EMSI Analyst3. Family support ing jobs refers to those jobs which support a family of four not including chi ldcare

costs in the Louisvi l le region. Based on calculat ions f rom the MIT l iv ing wage calculator that number is $45,341

4. Educat ional Digest. Table 330.10 Average undergraduate tuit ion and fees and room and board rates charged for ful l - t ime students in degree-grant ing postsecondary inst i tut ions, by level and control of inst i tut ion 1963-64 through 2013-14. U.S. Department of Educat ion National Center for Educat ion Stat ist ics, 2014.

5. Study of the American Publ ic ’s Opinion on Higher Educat ion. Postsecondary Educat ion Aspirat ions and Barr iers. Gal lup-Lumina Foundation, 2015.

6. Economy and Personal Finance Survey. US Parents’ Col lege Funding Worr ies are Top Money Concern. Gal lup, 2015

7. Off ice of Student Live, Col lege of Educat ion & Human Ecology. National Student Financial Wel lness Study. The Ohio State Univers i ty, 2014.

8. United States Department of Labor, Bureau of Labor Stat ist ics. This ref lects changes in average annual consumer pr ice index between 1984 and 2014.

9. Kentucky Postsecondary Educat ion Data System. Kentucky Publ ic Postsecondary Inst i tut ion Annual Tuit ion and Mandatory Fees for Ful l -Time Resident Undergraduate Students Academic Years 2002 – 2015. Kentucky Counci l on Postsecondary Educat ion.

10. Mitchel l & Leachman, Years of Cuts threaten to put Col lege out of Reach for More Students. Center for Budget Pol ic ies and Pr ior i t ies, 2015.

11. Integrated Postsecondary Educat ion Data System, In-State Mandatory tuit ion and fees 2008 – 2014. National Center for Educat ion Stat ist ics. Local 4-year inst i tut ions refer to 4-year non-prof i t and publ ic inst i tut ions tracked by 55,000 Degrees. These include Bel larmine Univers i ty, Hanover Col lege, Indiana Univers i ty Southeast, Saint Cathar ine Col lege, Spalding Univers i ty, and Univers i ty of Louisvi l le. Local 2-year publ ic inst i tut ions refer to 2-year publ ic inst i tut ions tracked by 55,000 Degrees. These include El izabethtown Community Col lege and Jefferson Community and Technical Col lege. Ivy Tech Community Col lege is t racked on our inst i tut ion l ist but tuit ion data is reported at the system level and not individual ly for the Sel lersburg campus and was therefore excluded from this analys is .

12. Integrated Postsecondary Educat ion Data System. Total Cost of Attendance, Average Net Pr ice, and average grants and scholarships for local inst i tut ions tracked by 55,000 Degrees. National Center for Educat ion and Stat ist ics.

13. Integrated Postsecondary Educat ion Data System. Average net pr ice of local publ ic 2-year inst i tut ions, 2008 – 2013. Local publ ic 2-year inst i tut ions include El izabethtown Community and Technical Col lege and Jefferson Community and Technical Col lege.

14. Abel & Deitz, Do the Benef i ts of Col lege St i l l Outweigh the Costs? Federal Reserve Bank of New York, 2014.

15. Center for Business and Economic Research. The Effects of Educat ion across the Kentucky Economy. Univers i ty of Kentucky, 2015.

16. Integrated Postsecondary Educat ion Data System, Total Fal l Undergraduate Enrol lment 2010 – 2014. National Center for Educat ion Stat ist ics.

17. Hi l lman & Orians. Community Col leges and Labor Market Condit ions: How Does Enrol lment Demand Change Relat ive to Local Unemployment Rates? Research in Higher Educat ion, 2013.

18. United States Wages and Salar ies Growth 1960 – 2016. Retr ieved from http://www.tradingeconomics.com/united-states/wage-growth

19. Project on Student Debt, Average student debt of Kentucky’s baccalaureate graduates and percent of graduates with debt 2008-2013.

20. Carnevale, Smith, & Melton, Learning whi le Earning: The New Normal. Gerogetown Center on Educat ion and the Workforce, 2015.

21. Kentucky Counci l on Postsecondary, Educat ion Student Loan Debt in Kentucky. Off ice of Research & Pol icy Analysis , 2015.

22. American Student Assistance, L i fe Delayed: The Impact of Student on the Dai ly L ives of Young Americans. 2013.

23. Kentucky Postsecondary Educat ion Data System, Net General Fund & Gross Tuit ion Revenue per FTE, 2000-2001 - 2013-2014, Constant 2014 Dol lars.

24. Desrochers & Kirshtein, Labor Intensive or Labor Expensive? Changing Staff ing and Compensat ion Patterns in Higher Educat ion. Delta Cost Project, 2014.

25. Chronicle of Higher Educat ion,What Publ ic Col lege Presidents Make. Retr ieved from http://chronicle.com/interact ives/executive-compensat ion

26. Newlon, The Col lege Amenit ies Arms Race. Forbes, 2014. Retr ieved from http://www.forbes.com/sites/caranewlon/2014/07/31/the-col lege-amenit ies-arms-race/#433f0cee1f3c

27. Lucca, Nadauld, & Shen, Credit Supply and the Rise in Col lege Tuit ion: Evidence from the Expansion in Federal Student Aid Programs. Federal Reserve Bank of New York, 2015.

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