Entitlement: The Coming Debate on Higher Education

Educational Forum, The, Summer 2004 by Strom, Paris S, Strom, Robert

Abstract

There are differing opinions about how to achieve the national goal of "No Child Left Behind." Concerns involve relevance and fairness of tests students must pass, merits and drawbacks of retention policies, access to tutoring, qualification of teachers, and sufficient funding. These issues may expand to include debate about whether college and vocational training should become an entitlement. Related factors are rising tuition, financial aid, demographic changes, career planning, curriculum practicality, and labor market forecasts.

Discussions about public education often include opinions on how to evaluate basic skills, whether all students should be required to meet minimal standards for graduation, and whether social promotion is warranted. School districts continue to search for better ways to improve remediation efforts, increase the amount of learning time in classes, and reduce dropout rates. These issues soon may be joined by concerns about whether higher education should become an entitlement. By identifying ahead of time the factors that seem most crucial, educators can help shape the debate in which parents and students will act as the main proponents.

Looking Ahead at Economic Considerations

The burden of funding higher education has been shifting for some time from government sources to students. This trend is reflected by dramatic tuition increases at public colleges and universities across the nation. Parents of young children are frightened by predictions of what going to college will cost when their children are old enough to attend. Commercials on television suggest that families start to save money for college as soon as a child is born. This advice is based on economic projections that, when today's infants are ready for higher education in 2022, the total tuition covering four years at a state university may be $50,000 or more. The current average tuition over four years is $20,000 at public institutions and as much as $120,000 at elite private universities (Arenson 1997; Trombley 2003).

The first state to offer a prepayment plan to its residents was Michigan in 1986. The details of these programs vary by state but they commonly lock in future tuition at current rates so families will be protected from escalating costs. This approach is referred to as a Guaranteed Education Tuition (GET) plan. Assume that the parents of an infant pay $5,000 this year for their child's future tuition as a college freshman. The couple submits the same amount in each of the next three years for a total investment of $20,000. The combined prepayments cover the tuition cost, thereby avoiding a possibility of overwhelming expenses without the plan in 2022. Parents of students in the elementary grades or middle school also can join, but they must pay a higher amount because their child will start college sooner. Prepayments are put into a government trust and invested with a guarantee to pay the four years of tuition at any of the public universities or colleges within the state. If a student is unable to meet academic requirements for admission or elects to attend school in another state, a refund will be provided with some interest penalty.

One assumption of prepayment plans has been that interest rates and college tuition would rise at a corresponding pace. However, lower interest rates but higher tuition has been the rule in recent years. A nationwide slowdown in the economy after the tragedy of 9/ 11 caused legislatures in most states to reduce the funding level they contribute to the operation of colleges and universities. Institutions have responded by increasing tuition; even with the high rates, the tuition students pay accounts for usually only 24 percent of the total cost of their education. Some states have decided to deny temporarily further membership in their prepayment plans; others are restructuring their plans so parent contributions will be tied to growing tuition; and still others have initiated deliberations over whether the legislature should assume responsibility to meet whatever shortfalls occur between what parents have paid and what tuition ultimately will cost when their child goes to college. The National Association of Student Financial Aid Administrators Web site, www.nasfaa.org/annual/pubs/csp0202.asp, describes the plans in place for each state along with contact information.

Congress passed the Economic Growth and Tax Relief Reconciliation Act in 2001. This legislation enlarged the tax advantage for families to set money aside for tuition and approved a more versatile strategy to augment prepayment options. Known as the 529 College Savings Plans, these alternatives do not lock in rates of tuition nor do they offer other guarantees. The investments depend on market condition risks, so profits may not cover all college costs. However, this option has no maximum annual amount for the contribution and compounds interest tax-free so it grows more rapidly. There are appealing features at the time the money is withdrawn as well. As long as the funds are applied for educational purposes, earnings on the investment remain tax-free. The money also may be used to attend universities located elsewhere than in the sponsoring state. Forecasts suggest that over $15 billion will be invested in prepayment plans or in the 529 College Savings Plans by 2010. One downside of 529 plans is that management fees could be high, and some states do not offer tax deductions (Tergesen 2003). The College Savings Plan Network, an affiliate of the National State Treasurers maintains a Web site, www.collegesavings.org, describing the options in every state.