New Study Shows 70% of Colleges Are Too Expensive for Most Americans

college affordability

While college is notoriously expensive, a new study shows that higher education is unaffordable for most Americans.

Recently, the Institute for Higher Education Policy (IHEP) found that 70 percent of colleges are unaffordable for lower-income and middle-income students who are unwilling or unable to take out student loans.

Find out what this study means for college affordability and what you can do to reduce your education costs.

The issue with college affordability

The “Limited Means, Limited Options” study from IHEP uses a benchmark created by the Lumina Foundation, a nonprofit organization dedicated to making college affordable for all. The Lumina Foundation also funded the report.

In the study, IHEP looks at the cost of attendance at more than 2,000 schools nationwide. They use 10 different student profiles to compare grants, scholarships, and loan offers.

With the Lumina Foundation’s “rule of 10” benchmark, IHEP deems a school affordable if students could pay the total cost of attendance by working 10 hours a week, after deducting scholarships and grants. IHEP also assumes the family put aside 10 percent of their discretionary income for 10 years.

The study finds that the vast majority of U.S. schools are unaffordable for typical Americans.

The study also shows that the idea that low-income students get more financial aid is a myth. In fact, only two percent of schools in the country offer enough financial assistance for a student who has a household income under $36,000 to attend.

Even those who are high-earners may struggle to send their children to school without taking out burdensome student loans. State and public schools, traditionally considered a lower-cost option, can be out of reach as well.

Zakiya Smith is the strategy director for finance and policy at the Lumina Foundation. Smith also formerly served the Obama administration as a senior advisor in the U.S. Department of Education. According to Smith, IHEP’s study highlights a growing issue in the nation.

“This study makes clear that low-income students face the brunt of the challenge in paying for college,” said Smith. “Middle-income students are also largely unable to afford most institutions covered in the study. All but the most wealthy families are struggling to pay for college.”

The changing cost of college

The concept of working through school has changed. In past decades, people could pay for their education by working part-time while studying. However, that’s no longer possible.

“You can no longer afford to go to an average college by only working part time,” Smith stated. “This report lays that fact bare.”

That’s because the price of attending a university has increased dramatically, affecting college affordability.

In the past 10 years, college prices rose by 45 percent, according to the Lumina Foundation. Yet during the same period, incomes have decreased by seven percent. This disparity highlights a growing problem as students try to get a degree.

“Today’s students are more likely to be older, working, and have children of their own, making the ‘typical’ archetype of a college student different than what we may imagine,” explained Smith. “Still, this analysis suggests that for most students and families, many colleges are unaffordable by a reasonable standard.”

And increasing college costs can force students and families to rely on student loans to fill the gap, adding another financial burden.

“They have to take on more debt than in the past, which can be intimidating and create further stratification,” said Smith.

How to make college more affordable

Despite the rising costs, Smith stresses the importance of getting a degree to ensure higher lifetime earnings.

“Students and families should keep striving, though, and not give up on trying to obtain some type of postsecondary credential (even if it is not the idyllic residential four-year experience),” Smith added.

To make college affordability a reality, families can look into alternative options. One way to reduce the cost of college is to attend community college for the first two years, then transfer to a four-year school. In a recent Student Loan Hero study, we found that students can save more than $11,000 with this approach.

And taking advantage of savings plans such as 529 accounts can help families earmark money for college.

“Families can plan ahead, to the extent that they have the capacity to save,” said Smith. “And, they can use tools like net price calculators and the College Scorecard to determine which colleges may be more affordable to reduce their reliance on debt.

What’s more, Smith said families should not only consider the cost of college, but also the outcomes. For instance, the idea that not all debt is “bad” if the college provides a quality education.

Finally, students and families should calculate the value of the degree and the school’s return on investment before choosing a university.

“High school seniors should consider the graduation rates and employment outcomes for colleges they are considering before making a final decision,” Smith explains. “You want to make sure that the institution has a good track record of success and a plan to help you succeed.”

Planning for college

Despite a decrease in college affordability and stagnant household incomes, a college degree remains an invaluable asset when it comes to your earning potential.

While IHEP’s study emphasizes the rising costs of college, getting a degree is still an important tool for accessing better job opportunities.

For more information about reducing your college expenses, check out this article on four common pitfalls to avoid in college.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.75% - 7.24%Undergrad
& Graduate
Visit SoFi
2.57% - 6.39%Undergrad
& Graduate
Visit Earnest
2.57% - 7.12%Undergrad
& Graduate
Visit CommonBond
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.58% - 7.26%Undergrad
& Graduate
Visit Lendkey
2.89% - 8.33%Undergrad
& Graduate
Visit Citizens
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.