The Brookings Institution held an event this afternoon focused on Crossing the Finish Line. It was a good discussion; Bill Bowen in particular did a great job of describing the book’s findings. In addition to the under-match / over-match / affirmative action stuff that I wrote about last week, there were also important findings about the relationship between college costs and graduation rates. In short: there is one, but only for low-income students.
As the net price of college increases for low-income students along the horizontal axis on the chart above, their graduation rate declines.  In the book, the authors note that “Our estimate is that an increase in annual net price of $1,000 is associated with a decline of 3 percentage points in the four-year graduation rate for students in the lowest income group.”

For well-off students, it’s a different story:

For the wealthiest students, the authors found “essentially no relationship between net price and graduation probability.” This is unsurprising. Every student or family has some price at which they’re either unable or unwilling to pay for college. For wealthy students, that price is far above what college actually costs. Poor students, by contrast, live near the margin, and every price increase pushes some students over the line, causing them to stop attending college altogether or enroll part-time, get a side job, or otherwise do things likely to delay graduation or cause them to drop out entirely. As higher education get ever more expensive, more and more low-income students will be affected this way.

Which makes it all the more regrettable that our country wastes an enormous amount of money providing college financial aid to wealthy students. Some of it comes through programs like 529 college savings plans that are deliberately designed to disproportionately benefit the wealthy. Others, like the popular Georgia HOPE scholarship and its various clones, give everyone the same amount of money but have no eligibility restrictions for income. (The same is true for subsidized tuition generally.) And colleges themselves have been directing greater proportions of their institutional aid to well-off students, as this graph from a recent Education Sector report attests:

In 1993, private colleges were much more likely to give financial aid to students in the bottom income quartile than to those in the top quartile. That gap has been steadily closing over time, and the average amount of aid given to the two groups is virtually the same.

The findings in Crossing the Finish Line suggest that we could achieve a net increase in overall graduation rates by redistributing existing financial aid dollars away from wealthy students toward poor students. Yet for the better part of twenty years, federal, state, and institutional policy-makers have been doing the opposite. It’s a shame.