The steadily rising costs of higher education -- roughly twice the rate of inflation -- seems likely to become a permanent part of the iron cross of American worries, joining concerns about retirement, health care and jobs.
Presidential candidates, not surprisingly, has tapped into this mounting anxiety, which could be aggravated if the credit crisis severely squeezes the multi-billion dollar student loan market.
Overall those costs have risen 40 percent in the last five years and 60 percent of students now graduate with average debt of $19,000.
“This is a stay-awake-at-night issue for American families and there has not been a lot of attention played against it,” said David Rochon, president of Upromise, which since its inception in 2001 has helped nearly 9 million members put $400 million into college savings accounts. Upromise was acquired by Sallie Mae in 2006.
In a poll two-thirds of Upromise members said they would be swayed by candidates’ education policy, but three-fourths said they did not believe what they were hearing so far.
“I want candidates to know that,” adds Rochon.
Asked which candidate would “do the most” to make a four-year college education affordable for the average family, Barack Obama outpolled rival Hillary Clinton - 31.7 percent to 23.2 percent. Both outscored John McCain, the presumptive Republican candidate, who scored only 14.9 percent.
Obama’s presidential website has the most detailed policy prescriptions about the subject, including a proposal to greatly simplify the application process for Pell Grants and other tax credits by letting families to check a tax form box.
That is meant to address the “low take-up rate” of federal government assistance available to families who are put off by the complexity of filling out the Free Application for Federal Student Aid (FAFSA) which has 127 questions.
While families would surely welcome simplification of the application, this might be resisted by states who rely on the detailed responses to determine eligibility for state-level support, explains Tom Parker of the Institute of Higher Education Policy (IHEP).
Democratic Swollen Wish List
Such issues are critical because only a tiny fraction of 17 million college students are from families that can afford to finance their education themselves and most have to rely on some federal support.
Uncle Sam’s help comes in the form of direct and indirect loan programs that guarantee private lenders. Only 20 percent of Washington’s aid comes in the form of grants for the neediest students.
Both Democratic candidates are in favor of significantly expanding Pell grants to help catch up with their eroded purchasing power, but desired indexing (to inflation) would be costly and politically tricky.
So is the idea of making tax credits refundable, which would put this key financing assistance within reach of lower-income families – those earning less than $60,000.
Whoever assumes the presidency next January will find a very challenging budget environment that will make any increased support for higher education politically difficult, said Travis Reindl, of Making Opportunity Affordable, an education advocacy group.
That is perhaps particularly true for the Democrats because education would be pitted against other priorities, such as universal health care.
“There will have to be day of reckoning, ” said Reindl. “There are a lot of mouths at the table to feed here and not a lot of extra scraps to go around”
Public vs. Private Lending
Another controversy is the Democrats’ effort to reduce the government-guaranteed yields earned by private lenders.
Those generous incentives to lend have long drawn criticisms from Democrats who have succeeded in slashing the allowable interest rates in the last two years.
The most recent cut, last fall, trimmed 55 basis points, to leave yields at 2.39 percent above 90-day commercial paper rates, according to Harrison Wadsworth, a representative of the Consumer Bankers Association.
But Obama maintains “billions” could be saved by the federal government taking over the lending completely, a policy which echoes that of the Clinton administration but which has not been highlighted by Senator Clinton.
“It’s crazy that the Democrats now want to create a government monopoly [on student loans] and expect it to save money,” says Wadsworth, noting the private sector’s market share of 60 percent is testimony to its efficiency.
Neither Democratic campaign made their education advisers available, while Douglas Holtz-Eakin, a top policy advisor for presumptive Republican candidate John McCain, said the candidate had yet not devised detailed policies but is concerned we are "falling down on the job" of preparing more college-ready high school graduates.
Despite the specter of a market exodus only a trickle of firms have bowed out so far, and there are still some 2,000 lenders in the market.
HIgher-risk trade schools are already feeling the impact of the credit squeeze but if the situation worsens "high-cost, four-year liberal arts colleges that can’t afford to subsidize financial aid any more than they already have” will be next in line, says the IHEP's Parker.
Disparity and Financial Literacy
Costs at these schools have been rising faster than at two-year schools, which may be a factor in why attendance by minorities is up in two-year but down in four-year colleges.
Just 12 percent of Hispanics and 16 percent of Blacks – compared to 33 percent of White students – graduate from four-year programs.
Obama says “the rising cost of college is a factor in this disparity” and will result in the exclusion of some 2 million academically qualified students during the decade ending in 2010.
But for all the media attention on the dramatic costs increases at the country’s most elite institutions, higher education is well within the reach of most Americans.
More than 80 percent of students attend public schools – 40 per cent of these are in community colleges – and nearly half of students pay less than $2,550 per year for annual in-state tuition and fees, according to a Government Accountability Office (GAO) report released in November. Three out of five students pay less than $4,750 per year.
What some call undue media attention may help explain why parents regularly overestimate college costs.
Another Upromise poll discovered that parents initially thought annual tuition and fees for a public four-year university were more than four times greater than the actual amount - 25,155 vs. $5,836.
When it came to private four-year university tuition, parents were less far off the mark but still greatly over-estimating it -- $46,712 vs. $22,218.
Higher education experts say for all the attention middle class concerns get the plight of lower-income students is a bigger systemic concern.
“The political campaign debate is not focused on what I think is the central issue which is whether or not we can help more low-income students go to college,” said Terry Hartle, a government relations expert for the American Council on Education. “Both political parties believe, correctly, that the middle class holds the key to the next election…and [so they] calibrate their arguments in ways that will appeal to them.”