Urban Institute Report Reveals Hidden Costs of Higher Education and Calls for Policy Response

Title:  Nontuition Expenses: A Framework for Developing Policy Solutions

Authors: Sandy Baum, Bryan J. Cook, Fanny Terrones, and Elise Colin

Source:  The Urban Institute

Discussions and proposals about higher education affordability often focus on helping students pay their tuition and fees and lowering the amount of tuition that students will pay. However, nontuition expenses such as food, housing, and other living expenses continue to make up the largest portions of student budgets and can increase an individual’s loan debt.

This is exemplified in a new report from the Urban Institute, which finds that tuition and fees represent less than 40 percent of the cost of attendance for students at four-year institutions and just one-fifth of the cost of attendance for those at two-year institutions. This report concludes that the lack of effective public policy addressing nontuition expenses has resulted in the following problems:

• A reliance on “unmet need metrics” that are unreliable because of imprecise and inaccurate student budget calculations
• A lack of clear and complete financial information for students to make informed decisions about enrollment and how to plan for expenses over multiple years of college
• Students lacking enough money and to cover all their expenses, even with grants, loans, and employment.

Federal and state grant programs covered all tuition and fee expenses for more than a quarter of full-time undergraduates in 2019-2020. This combination of programs benefits Pell-eligible and community college students by covering all tuition expenses for half of Pell students and 79 percent of community college Pell students. However, the Urban Institute reports that almost no undergraduate students receive enough grant aid to cover their entire budgets for all four years, and full-time Pell-receiving students at four-year institutions had per-year cost of attendance of over $15,000 after grant aid.

Cost of attendance vary for each student depending on a variety of factors, including family background, location of campus, program type, relationship to the labor market, and educational goals. This report highlights that creating standards for student aid subsidy levels is more likely to improve equity of resource allocation. Using the framework of the U.S. Department of Education’s College Financing Plan, the brief details that example budgets can be developed based on urban and rural areas, and for different living arrangements, families, single individuals, and more. The development of a national framework for nontuition expenses would allow students to more precisely understand and estimate housing, food, and living expenses that do not come solely from data provided by different institutions.

To address the three emerging challenges brought by nontuition expenses, the report offers the following policy recommendations:

• Providing federal campus-based student aid to students with the greatest calculated financial need.
• Exempting all types of student aid from federal income tax.
• Creating a standardized living allowance that can be added to the tuition and fees calculation in the determination of federal and state need-based awards. For example, a basic living grant dependent on urban and rural location of campuses could be developed outside the Pell Grant program. Like the Pell Grant, these awards would go directly to students to cover their expenses, not to institutions.
• Increasing and improving state need-based grant aid programs, allowing total grant aid to exceed tuition and fees and state aid to be applied to all elements of student budgets, or at least books, supplies, and related educational expenses.

To read the full report by the Urban Institute, click here.

—Austin Freeman