By: Nick Morrison
April 10, 2014
A college education could be slipping beyond the grasp of low-income families, according to a survey revealing a growing inequality in how America saves for college.
Figures released today show that while savings set aside for college have risen among American families as a whole, among low-income families they have dropped sharply.
The study holds a warning for the U.K., where a steep increase in tuition fees has provoked anxiety that university could be placed out of reach of a growing number of students from disadvantaged backgrounds.
The findings are revealed in How America Saves for College 2014, published by financial services company Sallie Mae. The study, first conducted in 2009, looks at how families save for their children's education and is based on interviews with 2,020 parents of under-18s, carried out by market research firm Ipsos.
On one level the results are encouraging. The amounts being set aside for college have bounced back from the steep decline brought on by the economic crash of 2008. Average savings marked for college education stood at $15,346, up 30% from the $11,781 identified in last year's report. Almost three quarters of high-income families, defined as $100,000 a year and above, and more than half of middle-income families, $35,000-100,000, were setting aside money specifically for education.
But while the proportion of college savers among low-income families, $35,000 and below, remained broadly constant on last year, the value of their savings has fallen. Last year, the average saved for college education was $5,093, this year it is $3,762, a drop of 26%.
In contrast, among high and middle-income families these figures have risen by 39% and 29%, to stand at $27,446 and $12,241 respectively. According to the National Center for Education Statistics, the average annual cost of college tuition, room and board was $19,344 in 2012-13, with tuition costs increasing by 4.5% at private universities and 8.3% at public colleges.
Two-thirds of low-income families reported not saving for college at all, compared with around a half of middle-income and a quarter of high-income families. Lack of money was, not surprisingly, cited as the principal reason.
This does not necessarily mean that students from disadvantaged backgrounds are less likely to go to college. Among those not saving for college, 22% cited an expectation that their children would qualify for financial aid or scholarships as the reason.
But the clear danger here is that, unless they do get external financial support, students from low-income families' face being priced out of a college education.
This is not just an American concern. In the U.K. a controversial government decision to lift a cap on tuition fees means universities can now charge up to £9,000 ($15,000) a year. Factor in living costs as well and students starting a degree course last September are expected to leave university with debts of £40,000 ($67,000).
As higher education becomes increasingly expensive, and the gap between richest and poorest grows ever larger, the prospects for young people hoping to improve their lot through education appear dimmer.
Getting a degree is not everything. Many people succeed despite, or because of, never having gone to university. But for those who want to go, lack of finance should not be the limiting factor.
Education is one of the key drivers for social mobility, but a lack of it can become a self-fulfilling prophecy. Among the parents in Sallie Mae's survey who were not saving for college, 65% did not have a degree themselves, compared with 51% of those who were putting money aside. Unless we break that cycle we risk creating generations of families who never have the chance to fulfill their potential.
The challenge for educators and policy-makers is to ensure that college does not become an unaffordable dream, and that students who have the ability and the desire should also have the opportunity.