Measuring College Affordability

Abstract:     
The declining college affordability hypothesis rests primarily on polling results, a rising share of income taken by college costs, and rising student debt. But, polls, debt, and the share of income taken by college costs are not sufficient statistics to determine if affordability has in fact declined for any given household. We derive an empirical measure of affordability from a household utility model that is sufficient to determine whether affordability is increasing or decreasing. We apply this empirical measure across the income distribution for public/private two-year and above institutions. For households with incomes less than or equal to median income, four year colleges became less affordable from 1987 to 2008. We also find that the financial burden imposed by higher college costs is creeping up the income distribution. The affordability measure derived in this paper can also be applied to other consumption items, such as housing, healthcare, consumer durables, food, or gasoline.

Number of Pages in PDF File: 21

Keywords: College cost, affordability, access, financial burden

JEL Classification: I23, I28

working papers series