College Crunch

American companies find it hard to get the skilled people they need now. Flash-forward 15 years: too few college classrooms and an even wider access gap between rich and poor

When Calvin Thomas and his friends graduated from University City High School in St. Louis in 1994, their dreams of entering the college-educated middle class seemed within reach. Armed with a 3.1 average, Thomas, for one, was accepted at six respected colleges, including Howard University in Washington, D.C. His friends did equally well. Since then, though, they have learned just how difficult the journey can be.

Turns out, Thomas wasn't able to enroll in any of the six colleges. The best financial-aid package he got fell $4,500 short, even after student loans. That was out of reach for his mother, who then was supporting his two younger brothers on around $30,000 a year. Sure, many of his friends did go off to school, says Thomas, but "a lot have dropped out because they couldn't swing it financially." Today, Thomas is 25 and about to enter his senior year in college. But he reached this point only by working full-time for several years, then enrolling in Harris-Stowe State, a black college in St. Louis that's cheaper than the schools he first hoped to attend.

It is one of the cruel ironies of the boom: Even as the nation's longest-running expansion created enormous wealth, the opportunities for future prosperity became more skewed than ever. Since the mid-1990s, most new college financial-aid initiatives have been geared toward helping the middle class, rather than increasing access for the poor. The result is a yawning gulf in which post-secondary students from the richest quartile of families are nearly seven times as likely as those from the poorest families to earn a college degree. "We are not doing a good job helping low-income students succeed" in getting a college degree, says Gaston Caperton, president of the College Board.

The failure now threatens to become a serious check on the U.S. economy. Over the next decade or so, the traditional college-age population will swell by some 15% as Generation Y, the children of the baby boomers, turns 18. This will produce 30 million 18- to 24-year-olds by 2015--3.7 million more potential college students than last year. But in sharp contrast to earlier generations, some 85% of the additional 3.7 million will be minorities, and 41% are likely to come from low-income families (charts). And these groups historically have had trouble getting to college. For example, 55% of blacks and 50% of Hispanics have attended college by age 20, vs. 65% of whites, according to the Educational Testing Service (ETS). Meanwhile, only 36% of 20-year-olds from low-income families go.

SKILL SQUEEZE. Suddenly, the affordability of higher education is a critical economic issue. Cuts in financial aid directly affect the flow of skilled talent to the country's employers. Already, college enrollments have slumped by 1.5% since 1998, to 15.3 million--a stark contrast to steep hikes in the early '90s. This even as employers' near-insatiable thirst for skilled workers has barely been slaked by the current slowdown. Although the jobless rate for college grads climbed by half a point this year, it's still an extremely low 2.2%. "The supply of people coming out of the post-secondary education system doesn't come near the demand we'll have in the next 10 years," warns Robert T. Jones, CEO of the National Alliance of Business, a corporate group that focuses on education.

A looming capacity crunch won't help. Right now, 53% of high school seniors go on to college. Just to maintain that ratio, colleges will need classrooms for 1.6 million more students. That could cost an extra $19 billion a year, figures Anthony P. Carnevale, an education expert at ETS. But higher-ed spending has been declining as a share of state budgets, which provide most of the money for public colleges.

The upshot? "Failure to expand investments in [higher education] will rob the economy of the...high-skilled workers necessary to sustain economic growth," the congressionally appointed Advisory Committee on Student Financial Assistance concluded in February. That, in turn, could bring more stratification, as students who can't afford college are stuck in low-paying jobs.

When the federal student-aid programs were created in the 1960s and '70s, the goal was to give a leg up to low-income students. But as tuition more than doubled since 1980, politicians have shifted toward making college more affordable for the middle class. The tone was set by President Clinton's 1997 Hope Scholarship program, which provides up to $3,000 in tax credits for two years of college. Clinton claimed Hope would "open the doors of college to a new generation." But students from the poorest families get no help, since they pay no federal income taxes. Instead, the credits go mostly to students from families earning $30,000 to $90,000 a year, most of whom would have gone to college anyway, says Thomas R. Wolanin, senior associate at the Institute for Higher Education Policy. The Hope program is "unlikely to have any substantial effects on increasing [college] enrollments," he argues.

Simultaneously, Georgia, Florida, Michigan, and several other states have begun offering merit-based scholarships. But in practice, "the majority of the merit awards go to middle- and upper-income students" because they attend better high schools and are better prepared, says Donald E. Heller, an education professor at the University of Michigan. Moreover, Heller figures blacks get just 3.6% of Michigan's Merit Awards, even though they account for 17.1% of the state's high school seniors.

Colleges are also offering more attractive packages to middle- and upper-income students while moving away from large awards to low-income students, says Macalester College President Michael McPherson. At elite, well-endowed colleges, most aid still goes to poor students. But at less wealthy schools, where tuition largely funds operations, it can make better business sense to give four middle-class kids a $5,000 discount each than to give one low-income student a $20,000 grant, says McPherson.

Meanwhile, the Pell grant, the largest federal program for poor students, now lags the rising cost of college. In 1975, the maximum Pell grant covered some 85% of the cost of four years at a public university. By last year, it covered just 39% of the bill, now $8,500 a year on average. Without major hikes in the Pell or even more sweeping plans to help kids pay for college, employers will find themselves hustling for qualified help.

By William C. Symonds

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