It Seems Unfair, But Rich Students Find It Easier To Get Student Loans
A lot of colleges spend a lot of money to attract students from affluent backgrounds by offering scholarships and grants based primarily on academic or other virtues. This leaves the students who are in need of financial aid with more limited resources.
Let’s take a look at this rising trend and why more and more colleges are following suit.
A Race For The Wealthy Students
According to the report released by the National Center for Education Statistics in 2019, students belonging to high-income groups received a higher amount of non-federal financial assistance as compared to students from moderate and low-income groups.
As per financial and educational experts, this is a seemingly rising trend because colleges are actively pursuing students belonging to affluent families. To attract more high-performing and meritorious students from these wealthy groups, college authorities are offering a lot of non-need-based aid.
For most colleges, their race for prestige means attracting students who can help boost their ranking and later give back to the college. Given wealthier students perfectly fit the bill, college authorities leave no stone unturned to woo the rich and the affluent.
Another important factor that drives this trend is the rate of completion of studies. As per the national data, students from moderate and low-income groups studying in low-cost schools are less likely to complete the full academic degree program and graduate as compared to students going to higher cost institutions.
Colleges Are Competing With Prices
The cost of a college education is rising with every new academic year. The competition is high and both private and public colleges are in neck-to-neck competition trying to mint money. Although it is derailing standard education and leaving those in need with limited resources, it is an increasingly common scenario playing out all across the US these days.
One can’t explicitly blame the colleges for this because the state funding for a college education has dropped a lot over the past decades. Hence, academic costs have risen substantially. To cater to these increased costs, colleges are battling it out to attract students from affluent families. The best way to attract rich students is by offering non-need-based scholarships that have a high dollar value. As more and more universities engage in this practice, the tougher it gets for the remaining colleges to compete.
Financial Aid Is Limited
Public colleges and universities provided low-cost higher education for needy students with the aid offered by the federal and state governments. However, over the last 25 years, more and more public colleges seeking institutional status, the rise of private colleges, and increasing disinvestment by the government have together forced colleges to increase the cost of higher education.
Many colleges and universities across America have inflated their prices and started providing non-need-based aid to lure out-of-state students belonging to high-income families with the sole aim of climbing up the rankings while simultaneously increasing their revenue. Between 2014-2017, more than half of American public universities (339) doubled their spending on non-need-based financial aid. In tandem, more than 92 universities quadrupled their spending whereas over 33 colleges increased it by almost 10 times.
While many public universities still do not have an enrollment management system and still spend their financial aid money mainly to meet the financial needs of students, their numbers are diminishing in large numbers. This paradigm shift has proved to be extremely detrimental for students hailing from lower-income groups.
Why Wealthy Students Are Borrowing More
Recent data from student loan reports point out the fact that students belonging from high-income families are borrowing larger sums frequently as compared to students from the other end of the economic spectrum.
The American Enterprise Institute pointed out that over the last 20 years, the number of students from affluent families (those making more than $114,000 a year) taking out student loans for higher education has doubled. In the mid-90s, the total number of ‘rich’ students taking out loans was just 30%. This had reached almost 60% by the end of 2019.
On the other hand, the number of students from low-income groups taking out loans hasn’t seen much change since the 90s and is still around 75%. There has been a huge increase in the average tuition and fees for students from affluent families. For instance, the total cost of education minus grants and scholarships in 1995-96 was $4,400 and it reached $13,604 by 2015-16. Based on these numbers, experts suggest that student loans owed by high-income families contribute to a disproportionately large share of the total student loan debt of $1.6 trillion.
The cost of education is increasing with every new academic year while the available financial aid from the government is decreasing. To survive and stay in the competition, colleges and universities are forced to increase the costs of tuition and fees. These increased costs lead college authorities to promote non-need-based aid to lure students from high-income groups, thus leaving the needy students with increasingly limited resources.