Proposed tuition benchmark could make college more affordable

Even though there are no generally accepted personal-finance guidelines regarding the payment of college tuition, a new paper from an education nonprofit is suggesting that a new benchmark is necessary for higher education.

In a paper released on Aug. 19, the nonprofit Lumina Foundation proposes that throughout the entire United States, families should pay for tuition with 10 percent of the unit’s discretionary income saved over 10 years, and that students work 10 hours per week while attending school.

Dubbed the “Rule of 10,” the suggested benchmark aims to define college affordability in all-encompassing terms of what families can and should pay, according to the Lumina Foundation.

“The meteoric rise of higher education costs — and the growing student debt that has come with it — threatens the vitality of our postsecondary system and thwarts many Americans from earning the education beyond high school that is so critical to success,” said Jamie Merisotis, president and CEO of Lumina Foundation, in a press release.

The proposed tuition initiative is unrealistic primarily because most public higher education institutions have extensive budgetary problems, said Thomas Prusa, a professor in the Department of Economics.

The goal of the policy is to provide public higher education to a large group of students, Prusa said.

A college affordability standard imposed by the Rule of 10 would either not allow universities to raise tuition, or it would necessitate assistance from federal or state-level government to subsidize tuition costs instead of the student, Prusa said.

“You could ‘probably’ implement the policy, but is it going to be that … there’s going to be a flow of money to offset the lost tuition that might otherwise come from students?” he said.

State governments had previously subsidized higher education more heavily, Prusa said. Over the last 20 years, decisions have been made that decreases how much education costs policymakers are willing to finance.

“There (are) real issues here with the affordability of higher education,” he said. “This Rule of 10 is trying to address a problem, which is dramatically higher tuition fees (charged) to students.”

The Rule of 10 is within the realm of possibility, but is also ambiguous because it does not specifically address household income contributions from families with multiple children, said Lenna Nepomnyaschy, an associate professor in the School of Social Work.

Families living below 200 percent of the poverty line would not be expected to dip into savings to pay for college or assume high-interest debt, but the student attending school could still work off some of the expense, according to the Lumina Foundation.

But Nepomnyaschy said the Rule of 10 would be unrealistic for a typical family of three people living below 200 percent of the poverty line — or $38,000 — because a household income that low could not support three people anyway.

“Even 10 percent is still undoable probably, for a family like that,” she said. “It’s impossible to live on $38,000 with three people, let alone trying to send someone to college.”

The Rule of 10 would not work for the extreme ends of the income distribution because the money paid by families at the higher end often fund students from low-income families, and a standard for all financial circumstances would limit subsidization for students that cannot afford tuition, Nepomnyaschy said.

Maintaining a progressive percentage rate of pay that rises with family income is the best solution for the mean time because it would allow for continued education opportunities for students from low-income families, Nepomnyaschy said.

“With any flax tax or any flat kind of flat calculation that’s not progressive, you’re hurting lower income people and helping higher income people,” she said. “The point is not to do that here, the point is to create access for lower income people.”

If a student earned the federal minimum wage of $7.25 for 10 hours of work per week, the student could contribute $3, 625 per year, or $14,500 over four years, according to the Lumina Foundation.

While the proposed benchmark could be customized to fit a family’s financial circumstances, the Rule of 10 only addresses public sector expenses and not private sector concerns, such as the rising cost of textbooks.

In the end game, state support for higher education from Trenton is going to comprise somewhere between 10 and 20 percent of the Rutgers budget, Prusa said. The remainder is going to be financed by University students, federal grants and other forms of aid not provided by the state.

“Somebody is going to have to pay the bill to make the universities operate — to allow the universities to operate,” he said.

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