A college degree is practically a prerequisite for economic mobility, but the potential students who need one the most often find it hardest to afford. Jim Wolfston, Founder and President, CollegeNET and Katie Bardaro, Lead Economist, PayScale spoke about the problem of making college accessible for low-income students, and how to help them embark on successful careers, post-graduation.

1. Economic Mobility Through
Education
SXSWedu 2015
Katie Bardaro, Lead Economist Jim Wolfston, CEO

2. THE AMERICAN DREAM
The promise that one can rise,
through education and hard
work, to any position in
society.

3. “RISE” to “POSITION”
* the promise of economic
mobility is a key incentive for
work and contribution

4. “…income distribution survives as one of
the most robust and important factors
associated with growth duration.”
– IMF Economists Andrew Berg and Jonathan Ostry
Source: “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” April 2011, International Monetary
Fund
Economic Mobility = Fewer
Recessions, Longer Recovery Periods

5. Do you believe the U.S. is
providing for sufficient
economic mobility?

6. “…the United States has both the
lowest mobility and highest
inequality among all* wealthy
democratic countries.”
– MIT Economist David Autor
*study of 13 OECD member countries for which consistent data were available
Source: “Skills, Education and the Rise of Earnings Inequality Among the ‘Other 99 Percent’” May 2014, Science

7. Intergenerational mobility disappearing
United States
1 in 20 Americans age 25 to 34 surpassed
the educational level of their parents.
20 Richest Nations
Average is 1 in 4.
Source: “Closing Education Gap Will Lift Economy, a Study Finds,” Feb 2015, The New York Times

8. Source: The Social Mobility Index – socialmobilityindex.org

9. Every year, 90% of the U.S. population
“transfers” $2 trillion to the top 10%.
That exceeds the trade deficit by 4x.
Source: "Capital in the 21st Century," Thomas Piketty - (trade deficit 2014 = $500 billion)
Our Biggest Economic Threat Is at
Home, Not Abroad

10. “The principal force for convergence
[reduction of inequality] –the diffusion of
knowledge –…depends in large part on
educational policies, access to training and
to the acquisition of appropriate skills, and
associated institutions.”
– Economist Thomas Piketty

11. Do you believe higher
education is driving
economic mobility?

12. “If the ladder of educational opportunity rises
high at the doors of some youth and scarcely
rises at the doors of others, while at the same
time formal education is made a prerequisite to
occupational and social advance, then…
…education may become the means, not of
eliminating race and class distinctions, but of
deepening and solidifying them.”
- President Harry S. Truman (1947)

13. Discounted Tuition
Still Out of Reach
College tuition (net
price) represents 84%
of avg. family HHI for
lowest-income students
Source: “Indicators of Higher Eduation Equity in the United
States,” 2015, The Pell Institute and Penn Ahead

14. “Rich kids graduate;
poor and working-class kids don’t.”
(~Paul Tough, NYT) Students from high-
income families 8x
more likely to
obtain a bachelors’
degree by age 24
than those from
low-income families
Gap is widening…
Source: “Indicators of Higher Eduation Equity in the United States,” 2015, The
Pell Institute and Penn Ahead; “Who Gets to Graduate?” May 2014, The New
York Times

15. Too many schools
landing in the high
debt, low ROI
quadrant

16. Just the Numbers
• Median net ROI (with aid)
adjusted for borrowing ¼ of
college cost = 7.9%
• Average return on university
endowment = 8.2%
Source: “College or the Stock Market?” March 2015,
PayScale College ROI Report

17. Qualitative
Factors
Quantitative
Factors
Social
Factors
Value of
Education
Of Course, What You Gain Is More Than
Increased Earning Potential
• Increased Knowledge
• Critical Thinking Skills
• Lifelong friendships
• Strong Career Network
• More Career Opportunities
• Increased Civic Engagement
• Better Health
• Rely Less on Gov’t Assistance
• Less Likely to be Incarcerated
• Higher Tax Revenue
• Social Mobility
• Additional Income
• Lower Unemployment

18. From a financial standpoint, college is a
good investment
if you graduate and if you don’t over-
extend yourself on student loans.
Those are big ifs for low-income students.

19. Until 2009, young adults with student loan debt
were more likely to:
• own homes
• have car loans
• have better credit scores
But now the opposite is true.
Source: “The Hefty Yoke of Student Loan Debt,” Feb 2014, The New York Times
Economic Opportunity Not Materializing

20. SOLUTION BRAINSTORM
What will make a
difference for low-
income students?

21. FOR DISCUSSION: Possible Solutions
• Eliminate tax deductibility of contributions to higher ed
unless the donation goes to admitting, advancing, and
funding students from below median income families
• Reform the Pell Grant system so that funds go only to
families below median income
• Tax inheritance to fund schooling grants to families
below the median income
• Vary tuition charges by major
• Set quotas for admission based upon family income