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College Cost Burden Is Shifting To Families, Treasury Department Says

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As college costs rise, families are being forced to pay for a rising share of college tuition, the Treasury Department says.
As college costs rise, families are being forced to pay for a rising share of college tuition, the Treasury Department says.

There is a "fundamental shift" underway in how college is being paid for, Jan Eberly, the Treasury Department's assistant secretary for economic policy, said in an interview with the Wall Street Journal on Tuesday.

Families are bearing a larger share of the cost of college than before, a troublesome trend as Americans have suffered record declines in wealth.

Due to government cuts to higher education, public colleges have doubled their reliance on tuition dollars since the late 1980s, Eberly told the WSJ. In turn, college tuition has risen three times more quickly than inflation since 1983, according to a recent study by Bain & Co.

Americans don't have much money to spare when it comes to paying for college. The median family's net worth was lower in 2010 than it was in 1989, according to a Bloomberg Businessweek analysis of Federal Reserve data. Workers' inflation-adjusted average hourly earnings have stayed nearly stagnant over the past year, according to the Labor Department.

As a result, more Americans are turning to student loans to pay for college. Total student loan debt in the U.S. has spiked 148 percent since the beginning of 2005 to a record $902 billion, according to a recent analysis by the Federal Reserve Bank of New York.

All of this is bad news for the country's growing income gap, which is likely to only widen as higher education becomes more out of reach for poor Americans.

As the tuition burden shifts from government to families, America's poorest people may be shut of higher education and thus condemned to lower earnings. Starting salaries for high school graduates not in college are barely higher than the federal minimum wage, according to a recent Rutgers University study. The median starting salary of recent college graduates, in contrast, is $28,000 per year, according to Rutgers University.

Shifting costs may also affect minority college enrollment. Hispanic families, for example, are less likely to borrow money to pay for college, according to a recent study by Sallie Mae. In 2009, the net worth of blacks and Hispanics was less than 6 percent the net worth of whites, according to the Pew Research Center.

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