University of Virginia Library

Learn Now Pay Later?

Reprinted from The Economist,
October 26, 1968

American colleges and universities
have always had their scholarships
for needy students, provided
from state and local and private
funds; they have also tried to provide
jobs for those working their
way through college. What is new is
the aid made available by the
federal government in the past
decade, beginning with the National
Defence Education Act; this was
whisked through Congress in the
wake of the Soviet sputnik, which
cast a bright light on the deficiencies
of American education.

Help is certainly needed. A
study for the federal Office of
Education estimates that sending a
son or daughter to a public four-year
college or university costs, for
each year, a sum equal to two-thirds
of a poor family's total income;
even for families with an
average income of $8,000 the costs
amount to a fifth of this each year.
At private institutions the proportions
are higher. In the 1966-67
year to go to a private four-year
college took, on average, $2,564 a
year: to a public one $1,561; to
two-year community college,
$1,103 (the student lives at home).

The federal aid package and
for needy students it usually is a
package deal offers educational
opportunity grants for the poorest
and subsidised jobs (both during
the summer holidays and for up to
15 hours a week during the term).
There are loans to cover the gap
that remains. The average grant has
been estimated at about $433 a
year (the maximum has just been
raised from $800 to $1,000). So-called
work-study grants average
$826 for about 585 hours of work,
which may be done for the college
(perhaps in library or canteen) or
elsewhere, perhaps at a school for
very poor children. The college has
to put up 20 per cent of the money
for work-study grants. About 30
per cent of all students do part-time
work, not all of them under the
subsidised programme.

Of the two federal loan programmes,
the oldest and most
popular is that provided under
NDEA, which takes account of
need. It is administered by the
colleges and universities, no repayment
of principal or payment of
interest is required as long as the
recipient is in college and a subsidised
rate of interest of only 3 per
cent is charged after he leaves. He
has up to ten years to repay the
loan and will be forgiven half of it
if he teaches for five years - more
if he teaches in a school in the
slums.

The scheme imposes, however, a
heavy burden on the colleges,
which are not notable for their
administrative skills; the burden is
heaviest for poor colleges which are
always short of staff. At these the
rate of default on student loans is
much higher than the average of 3
per cent, compared with 1.7 per
cent for commercial loans. An additional
embarrassment is, that Congress
has just given colleges the
right to withdraw aid from students
who overstep the mark in demonstrations;
in serious cases this is
mandatory.

The federal government also
guarantees 80 per cent of loans
made to students by banks (most
states insure the rest). These loans
are available to almost everyone.
The government pays the interest
while the student is in college but
does not subsidise it when he
leaves. Until early this month, when
Congress put the rate of interest
which banks might charge up to 7
per cent, there was not much enthusiasm
for these loans among
banks; some extended them only to
the children of their depositors.

The theory behind all these
loans is that higher education leads
to much higher earnings after
graduation; thus it is considered fair
for the student to make a substantial
contribution. But starting
out in life under a load of indebtedness
places a far heavier burden on
the poor than on the comfortably
off. In the present financial year it
is estimated that about 1.6 million
students will receive federal assistance
and in addition some 500,000
ex-servicemen may receive grants
from the Veterans' Administration
as well as aid of other kinds. The
total cost is put at about $1.4
billion.

Still it remains sadly true that a
bright child from a well-off family
has a 90 per cent chance of going to
college compared with a 60 per
cent chance for an equally bright
youngster from a poor one. Money
is not the only problem. Poor
children may be badly prepared,
may not know about the opportunities
or may lack interest. Both the
colleges and the government are
trying to search out promising
young people and help them.
Upward Bound, which began as
part of the war on poverty and
which is now being transferred to
the Office of Education, helps the
really poor to stay at secondary
school and to go on to college.
Talent Search, a newer project,
works with those who are not quite
so badly off. Only Upward Bound
has been in existence long enough
to allow any conclusions to be
drawn. Unfortunately such evidence
as there is suggests that it is
one thing to get a poor boy or girl
into college, another to keep them
there.