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The Ladder

A Blog from New America's Asset Building Program

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Recent comments by presidential candidate Rick Santorum have invited skepticism on the importance of a college education. And, there are legitimate reasons to question the value of a college degree, to be sure. After all, the cost of college is going up and the ability of most families to pay those costs is shrinking in comparison. As a result, student loan debt is on the rise and, since recent graduates are entering the worst labor market since the Depression, so, too, are defaults.

But, the Senator didn’t take issue with any of those points. Instead, he suggested that President Obama’s goal of increasing college access and affordability was an attempt to cultivate a liberal ideology in the minds of students. “Oh, I understand why he wants you to go to college. He wants to remake you in his image. I want to create jobs so people can remake their children into their image, not his.” For someone who has admirably spoken to the lack of economic mobility in the United States, especially when compared to other countries, his seeming contempt for something that has been shown to play a decisive role in moving lower-income children into the middle class is disappointing.

The fact is that only 16 percent of Americans born in the bottom income quintile who earn a college degree stay at the bottom, compared to 45 percent of those without a college degree. When viewed with recent unemployment and income data, it becomes clear both how a degree enhances mobility and that the value of a college degree still holds. Unemployment rates, for example, are twice as high for high school graduates and three times as high for high school dropouts than those with a bachelor’s degree or higher. For those who are working, someone with a bachelor’s degree earns $1.44 for every $1 earned by someone with only a high school degree. Even among young adults who are entering the job market at its weakest point in recent history, a college degree still presents a marked advantage. In 2010, 88 percent of 23 and 24 year olds with a college degree were employed and, on average, earning $581 a week compared to only 64 percent of their peers with just a high school diploma who were earning $305.

With the value of the degree itself still in good standing, it becomes clear that the real problem is how that degree is financed. While debt may be the most visible indicator of this flawed system, less obvious, but more consequential (especially for Senator Santorum’s concern about limited economic mobility) are the students who never pursue a degree or are unable to persist because of cost. It’s estimated that half of all college-qualified low- and moderate-income students are unable to attend a four-year college due to cost, and a quarter fail to enroll in any postsecondary institution at all. So, especially with the challenges of economic mobility in mind, a more relevant concern for Senator Santorum should be whether or not college is an accessible option for the students who have the most to gain from that degree.

In a paper the Asset Building Program released today, we propose that savings can both build the resources and expectations that low and moderate income students need to go to college and do so without compromising their future wellbeing through debt. As powerful as this approach could be, these families currently face significant barriers to savings, including, ironically, from the public assistance programs that are intended to improve financial security. We propose eliminating these barriers and offering a robust set of policies to connect families with the financial services and incentives that will allow them to save.

Currently, most federal benefits to support college savings are distributed through the tax system and are highly concentrated on the higher end of the income scale. Even in the context of education spending where the majority of support is targeted to low-income households (primarily through Pell grants), this support is in the form of direct assistance, not savings incentives. So, not only are low-income families ineligible to benefit from those policy supports, they are penalized by public assistance rules that restrict the amount of savings they can have to receive benefits. Disparate treatment of savings owned by higher-income and lower-income perpetuates a two-tier policy system where higher income families are rewarded for long-term planning and investment and low-income families are either penalized for saving or receive benefits only at the time of need and. Ultimately, this exacerbates the gap that exists between the two groups in college access.

Closing the college access gap necessarily means closing the savings policy gap as well. We invite you to read our report identifying ways to do so here.

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