01/20/2012 08:42 pm ET Updated Mar 21, 2012

College Affordability: Damned If You Go, Damned If You Don't?

I have traveled the tortuous road that separates the haves from the have-nots, so I'm intimately familiar with the structural barriers that stall upward mobility in America. It's not news to me that 20 percent of U.S. households earn half of all income, while the poorest 20 percent earn almost none. And though it pains me, I can wrap my head around data that place inequality in the United States at higher levels than in other developed countries.

But I can't fully grasp how U.S. income inequality can be on par with that of Tunisia, Sri Lanka and Morocco, or how our intergenerational mobility roughly matches that of Nepal and Pakistan.

Higher education has long been heralded as an engine of opportunity in America. Now, more than ever, economic demands are making a post-secondary degree the surest way into the middle class. Indeed, we'll likely hear about it in Tuesday's State of the Union address, since the Obama administration has taken a number of steps to try to make college more affordable. But skyrocketing tuition rates, plus policies that shift more and more financial aid away from those who need it most, are rendering the decision to go to college a damned if you go, damned if you don't proposition for too many hard-working students like Erica and Katrina.

Erica is a 19-year-old student at Fordham University, has a partial scholarship and is paying the rest of her tuition through student loans. She estimates that she will owe $75,000 in student loans when she graduates.

And even at public institutions, students are encumbering similarly life-altering debt. Katrina attends the University of Illinois-Chicago, and will graduate this spring approximately $50,000 in the hole. Indeed, millions of students nationwide are in the same boat, staying awake at night, worrying about their financial futures.

The reality is that college is becoming increasingly unaffordable. Indeed, college tuition and fees are growing almost twice as fast as health care costs, and about four and a half times as fast as inflation. In addition, a soft inequality bias in federal, state and institutional policies is shaping the reality students face.

Over the past two decades, states have increased funding for grants unrelated to student financial need at almost five times the rate of need-based grants. In the 1990s, public four-year institutions invested twice as much grant aid on their low-income students as they did on more affluent ones. Today, spending on both groups is about equal. Private colleges, meanwhile, now spend nearly twice as much on the wealthiest students as on the neediest.

But this isn't just an institutional problem. Just last year, more than $23 billion in federal financial aid dollars were diverted to education tax credits -- some of which benefit families making more than $100,000 per year -- leaving the Federal Pell Grant Program and the nearly 10 million low-income and working-class students who rely on it vulnerable to cuts.

These policies spawn dreadful results. Today, low-income students must finance an amount equivalent to 72 percent of their family's annual income to attend a public university for one year, even after accounting for grant aid. So is it any surprise that by age 24, you're 10 times more likely to have a bachelor's degree if your parents are wealthy than if they're poor? Or that for the first time in our nation's history, student loan debt tops credit card debt?

Colleges and universities need to control costs. But federal and state policymakers also should be targeting our scarce resources to make college more affordable for those students who have the least but can contribute the most to resurrecting a strong middle class. Affordability, after all, depends not only on cost, but on students' ability to pay -- without foreclosing on their future because of unfathomable student loan debt.

Policymakers can do much to reverse America's rising tide of inequality while managing their budgets. Here are three steps to get them started:

First, instead of fighting over how to reduce Pell Grant spending, federal policymakers should look elsewhere for cost savings. They could, for example, eliminate tax benefits for building private nonprofit educational facilities and lower the income caps for higher education tax credits and deductions.

Second, state policymakers should reverse the dangerous shift toward burdening low-income students with the lion's share of college costs. Take California, which slashed $650 million from the California State University's budget this year, spiking tuition by nearly 23 percent. Combined with Governor Jerry Brown's recent proposal to slash the state Cal Grant program, this will be devastating the state's economic recovery, amounting to a one-two punch against hard-working, low- and middle-income students trying to afford college.

Third, institutional policymakers must end the financial aid arms race and commit to meeting the financial needs of low-income students -- before offering scholarships and grants aimed at attracting elite students.

We can and must do a better job of translating our democratic ideals into policies and practices at all levels that sustain, rather than erode, opportunity. We can make it not only possible, but probable that the growing numbers of low-income students can rise to the middle class, paving the way for less inequality and more social mobility in America.