Book summary “Paying the Price”: summary

Introduction

You grow up hearing a simple promise: if you study hard and earn a college degree, you secure a stable middle-class life. Today, that traditional bargain is broken. Tuition has skyrocketed, public support has vanished, and financial aid fails to cover the real cost of living.

Sara Goldrick-Rab argues in Paying the Price that the modern financial aid system leaves low-income students in debilitating debt, chronic hunger, and homelessness. Drawing on a groundbreaking study of three thousand students, the book exposes the hidden crises behind rising dropout rates.

You will discover how systemic flaws in aid distribution, family obligations, and low-wage work trap ambitious students. The book answers several critical questions about higher education today:

• Why do standard grants fall so short of actual college expenses?
• How do food insecurity and housing instability derail academic progress?
• What reforms can truly make higher education accessible for everyone?

1. The Broken Bargain of Higher Education

You inherit a world where the old promise of higher education no longer holds true. Hard work and ambition used to pay for a college degree. Today, skyrocketing costs and stagnant family incomes break that traditional bargain.

The traditional path to economic mobility through higher education has broken down because skyrocketing college costs and stagnant family incomes outpace federal financial aid.

The New Economics of College

You watch college prices outpace your earnings year after year. Since 2000, community college costs increased by 28 percent. Public university attendance costs rose by 54 percent over the same period.

Middle-income families earned 64000 dollars in 2013, which represents a 5 percent decline over the prior decade. Families in the bottom fifth of the income distribution earned 16000 dollars, an 8 percent decrease.

Origins of the Pell Grant

The federal financial aid system was originally designed to make higher education universally accessible. Established by the Higher Education Act of 1965 and Senator Claiborne Pell's 1972 bill, the Pell Grant Program provided direct vouchers to cover a significant portion of college costs. Senator Pell proposed an annual voucher amount of $1,200 to lower tuition costs. By 1972, 80 percent of American college students enrolled in public institutions.

When the program began, the maximum Pell Grant covered 80 percent of public university costs. Today, the purchasing power of the Pell has severely eroded. The maximum Pell covers less than one-third of public four-year college costs and 60 percent of community college costs.

Despite increased college access, the graduation gap between low-income and high-income students has widened significantly over the decades. The bachelor's degree completion gap between low-income and high-income individuals born in the early 1960s was 31 percentage points. For individuals born in the late 1970s, that gap widened to 45 percentage points.

2. State Disinvestment and Institutional Funding

Drastic cuts in state appropriations for public higher education have forced colleges to raise tuition and shift the financial burden directly onto students.

The Decline of State Support

State fiscal support for higher education plummeted from its peak in the late 1970s. In 1979, state financial support reached $10.42 per $1,000 of state personal income. By 2010, that level fell to $6.32 per $1,000.

If states had maintained their 1981 funding levels, the hypothetical contribution would have reached $146 billion in 2015. Instead, the actual contribution totaled only $81 billion. Wisconsin cut funding drastically due to shifting political priorities and competing budget needs. In 1972, Wisconsin invested $15 in public higher education per $1,000 of state personal income. By 2008, that investment dropped to $6.

During the Great Recession between 2006 and 2012, state appropriations per student declined by over $1,000. Public university tuition rose by $1,669 during this period, while public two-year college tuition rose by $442. State unemployment rates in Wisconsin rose by 4.2 percent at the same time.

Tuition and Nontuition Costs

Most increases in the price of college since 1996 have come from nontuition components such as living costs, housing, and books rather than tuition and fees. Between 50 and 80 percent of total sticker prices and the majority of historical growth stem from non-instructional costs.

Between 1996 and 2012, the average annual cost of attendance for Pell recipients at community colleges rose from about $8,500 to nearly $13,000, representing a 52 percent increase. At public universities, the annual price increased from almost $14,000 to nearly $20,000. Between 1999 and 2012, fees grew by 104 percent at community colleges and 95 percent at public universities.

Urban public universities in economically distressed cities face severe funding disadvantages that translate into higher net prices. UW-Milwaukee holds an endowment of just over $10 million, while UW-Madison holds close to $2.2 billion. Madison receives more than twice as much state appropriation per full-time student and covers 65 percent of instructional costs through public funds. Students at UW-Milwaukee must shoulder over 80 percent of instructional costs themselves.

In Milwaukee, an average low-income student paid roughly 4,500 dollars per year after grants to attend the public university in 1990. By 2008, when the study cohort enrolled, a similarly situated student paid about 7,460 dollars.

3. The Wisconsin Scholars Longitudinal Study

A rigorous mixed-methods study tracking 3,000 students reveals the real-world impact of financial constraints and targeted grant interventions on college success.

You can understand the crisis by examining the Wisconsin Scholars Longitudinal Study. Launched in September 2008, the project tracked 3,000 first-time students entering public colleges across Wisconsin during the Great Recession. Researchers combined administrative data, lengthy surveys, and in-depth interviews to analyze daily college experiences.

Researchers selected fifty students from a pool of volunteers across four universities and two technical colleges to conduct repeated in-person interviews regarding their daily financial struggles. These participants came from families with an average adjusted gross income of $25,000 and an average expected family contribution of $1,370.

Study Design and Demographics

The WSLS sample included 3,000 total college students. Researchers assigned 1,200 students to receive the Wisconsin Scholars Grant offer and placed 1,800 students into a control group.

The data collection relied on diverse sources:

• 2008 to 2014 six-year data collection period;
• 50 participants interviewed as many as eight times;
• 48 percent of the sample giving consent to link administrative data;
• 72 percent final response rate for the year-one survey;
• 77 percent final response rate for the year-two survey.

Philanthropic Grant Interventions

Private philanthropic initiatives can create rigorous research opportunities by distributing supplementary grants. Funded by John and Tashia Morgridge with a $175 million gift in December 2007, the Fund for Wisconsin Scholars operates the largest private scholarship program in the state.

To qualify for the Wisconsin Scholars Grant, you had to meet specific criteria:

• Reside in the state of Wisconsin;
• Graduate from a Wisconsin public high school no more than three years prior;
• Enroll full time at a Wisconsin public college or university;
• File a Free Application for Federal Student Aid (FAFSA);
• Be a Pell Grant recipient;
• Have a net price of at least one dollar.

The foundation offered $3,500 per year to university students and $1,800 per year to two-year college students. Each university recipient received $1,750 per semester for up to ten semesters, reaching a maximum total award of $17,500.

4. The Bureaucracy and Flaws of Financial Aid

Financial aid functions differently from actual cash. You cannot readily use restricted financial aid dollars for immediate survival needs like purchasing food. Students echo the sentiment of the Wu-Tang Clan that cash rules everything around them.

The financial aid process is overly complex, relies on flawed living allowances, and features rigid parental dependency rules that disadvantage independent students.

FAFSA Complexity

The Free Application for Federal Student Aid requires complex tax information from prior years. Gathering necessary financial information takes extensive time, and many dependent students struggle to obtain tax data from parents.

Over 90 percent of surveyed students stated it took longer than thirty minutes to complete the FAFSA. Twenty-nine percent took one to two hours, and almost 20 percent required more than two hours.

A student interviewed needed to repeatedly nag his parents for their financial information and could not file until they complied. Another faced a father who refused to provide data because he was not helping pay for college.

Administrative burdens deter low-income students. Eleven percent of undergraduates below the poverty line and 15 percent between 100 and 150 percent of the poverty line had not filed a FAFSA.

Living Allowances and Rules

Federal financial aid rules force students under age twenty-four to rely on parental financial data regardless of parental support. Nine percent of students with an expected family contribution greater than zero received no financial support from parents. Twenty-three percent reported that their parents provided no money specifically for tuition.

An interviewed student expressed extreme frustration at being considered a dependent despite working and living independently. He wished he had a child or could get married just to have his schooling paid for.

Colleges also severely underestimate living allowances for off-campus students. At least one-fifth of institutions provide living allowances at least 20 percent below a modest standard of living.

Institutions assume living at home with family is free. Thirty-seven percent of undergraduates live at home, and 50 percent live off campus alone or with someone other than family. In reality, 55 percent of low- and moderate-income undergraduates in Wisconsin made financial contributions to family, and Peter Kinsley found that 13 percent of students in his sample regularly provided money to their families.

5. Debt, Loans, and the Racial Wealth Gap

The original goal of the Pell Grant was to shield low-income students from needing to borrow money for higher education. Due to severe funding gaps, 88 percent of Pell recipients borrow money compared to 53 percent of non-Pell students, with many relying on unsubsidized federal loans and high-interest private loans.

Because financial aid fails to cover total costs, low-income students are increasingly forced to take on risky loans, driving the modern student debt crisis.

Between 1996 and 2012, the fraction of public sector Pell recipients utilizing unsubsidized federal loans grew from 6 percent to more than 30 percent. Total annual borrowing reached $70 billion in 2013-14, up from $25 billion in the mid-1990s. Public sector Pell recipients took on 6,600 dollars and more in average first-year loans. Total U.S. student loan debt reached 1.1 trillion dollars in 2014.

Subsidized Versus Unsubsidized Loans

Federal student loans have shifted the financial burden onto students during economic recessions and rising college costs. Subsidized loans do not accrue interest until you leave school, but unsubsidized loans accrue interest immediately. As college costs soared and family incomes dropped during the recession, unsubsidized loan volume doubled repeatedly while subsidized loans grew much more slowly.

Unsubsidized loan volume grew from about $10 billion in 1995-96 to almost $50 billion in 2011-12. The lifetime maximum for federal Stafford Loans for undergraduate dependent students sits at 31,000 dollars.

The Color of Student Debt

Racial disparities in wealth heavily drive student borrowing patterns, making low-income African American students disproportionately indebted and vulnerable to dropping out. Because the racial wealth gap is far larger than the income gap and white families hold vastly more wealth than black families, African American students have fewer assets to rely on. Consequently, they borrow at higher rates and face higher dropout rates without credentials.

In 2011-12, 52 percent of black undergraduates had a student loan compared to 42 percent of white students and 36 percent of Hispanic students. Thirty-eight percent of African American students had a negative expected family contribution compared to 11 percent of white students. The absolute racial gap in wealth increased by 151,000 dollars between 1984 and 2009.

African American and Hispanic families suffered disproportionate asset and home equity destruction during the Great Recession, leaving them with severely diminished economic stability compared to white families. Between 2005 and 2009, median home equity for Hispanic homeowners fell by half from 99,983 to 49,145 dollars, and for African Americans it fell from 76,910 to 59,000 dollars.

Twenty-four percent of Hispanic and African American households had no assets other than a vehicle, compared to 6 percent of white households. The ratio of white wealth to black wealth reached 13 to 1 in 2013, up from 10 to 1 in 2007. The ratio of white wealth to Hispanic wealth stood at 10.3 to 1 in 2013.

The real student debt crisis centers on students who drop out without a degree while carrying debt, leaving them at the highest risk of default and delinquency. Debt amount is inversely correlated with loan trouble. Students who fail to graduate have smaller total debts but lack credentials, forcing them into low-paying jobs where even modest loan repayments cause severe financial compromise. Indebted college dropouts are disproportionately low-income students and students of color who entered a debt-financed system without completing their credentials.

6. Basic Needs Insecurity and Survival Strategies

Severe financial shortfalls force low-income students to endure chronic food insecurity, housing instability, and extreme psychic stress that impair academic performance.

Surveys of Wisconsin Longitudinal Study of Students participants reveal that you adopt a wide array of coping mechanisms due to lack of funds. You cut social activities, adjust food purchases, and postpone medical care.

• 14 percent of students did not buy required books or supplies
• 18 percent did without a computer
• 21 percent reduced utility usage
• 22 percent put off paying bills
• 23 percent postponed medical or dental care
• 38 percent increased amount of time spent working
• 39 percent borrowed money; used credit cards more
• 49 percent stopped or cut back on driving
• 70 percent changed food shopping or eating habits
• 80 percent cut back on social activities and entertainment

Norbert Webster took a twenty-five-hour-per-week weekend and evening job during his second year. This work proved to be too much for his studies, forcing him to reduce his hours to fifteen per week and move off campus with roommates to save money.

Food and Housing Insecurity

Many low-income students enter college accustomed to material hardships from childhood. You then experience severe food scarcity that forces trade-offs between meals and other living expenses, directly undermining your academic achievement.

24 percent of WSLS students indicated food insecurity in fall 2009. 6 percent went without eating for an entire day because they lacked enough money for food. 38 percent of CUNY undergraduates suffered from food insecurity.

Ian Williams lived in a family where there was not enough to eat. He rationalized college food scarcity as a normal continuation of his childhood. Community college and CUNY surveys revealed high rates of hunger among students.

Inability to pay rent or utility bills, exposure to pests and structural defects, and severe sleep deficits are common. 16 percent of students were unable to pay their rent. 17 percent were unable to pay their utilities. 29 percent reported having restless sleep for three or more days in the past week. 18 percent rated their sleep quality as fairly or very bad.

Brooke A. Evans described her experience of being homeless while attending the University of Wisconsin-Madison. She felt like an impostor while worrying about food and shelter instead of focusing on lectures.

Financial scarcity imposes heavy psychic costs that reduce mental bandwidth and distort decision-making. 43 percent of Wisconsin public college students felt they could use support for their mental health. 37 percent had been diagnosed with a specific disorder such as depression or anxiety. 12 percent had thought about suicide in the last twelve months.

7. Family Obligations and Reciprocal Interdependence

Federal financial aid assumes a unidirectional flow of money from parents to students. The system ignores the reality that low-income college students frequently send money and time back to their families.

Financial aid policies ignore the reality that low-income students frequently send money and time back to their families, which directly undermines their college retention.

The Myth of Unidirectional Support

Financial aid policies treat any student money spent on relatives as noneducational expenses. Officials sometimes even label these necessary actions as fraud.

About one in three students engage in reciprocal financial interdependence with their families. Reciprocal patterns of giving within low-income families mean that you often divert meager resources or student loan refunds to support relatives.

Ian Williams shared his financial aid and work earnings with his mother and brothers. He even paid for his older brother to take a community college course to keep him off the streets.

The Cost of Family Obligations

Low-income college students often feel a deep sense of obligation to support their families financially. This dynamic stems from early childhood roles and directly undermines your own college retention and success.

Providing regular cash transfers to parents carries severe academic consequences:

• it more than doubles the odds that a student will work more than twenty hours a week during the first year;
• it yields a 7 percent reduction in the odds of reenrolling for a second year of college;
• it involves 11 percent of university students who give their families at least 50 dollars per month.

Nima Chaudhary spent eight hours a week caring for her disabled father. She managed this responsibility while juggling full-time studies and a family where her mother worked two jobs sixteen hours a day.

8. Work Schedules and Academic Trade-offs

Student Motivation and Time Use

You might assume that low-income students lack drive or academic focus. Data from the Wisconsin Scholars Longitudinal Study demonstrate that vulnerable undergraduates possess strong intrinsic and extrinsic motivations for higher education.

Nearly 70 percent of students in the study cited a love of learning as very or extremely important. A total of 94 percent believed education would pay off in the future, and 88 percent felt college performance affects long-term success. Furthermore, 67 percent wanted to pursue a graduate degree, while 70 percent believed they were just as smart as classmates and 60 percent felt able to get good grades.

While general surveys like the American Time Use Survey indicate undergraduates spend only about 14 percent of their time on school, data from the Wisconsin study show that Pell Grant recipients devote more attention to their studies. Low-income students spent 28 percent of their 24-hour day on educational activities, alongside 6 percent on working and 6 percent on family.

Employment and Progress Traps

Low-income students are highly motivated, but rigid outside employment and satisfactory academic progress rules force them into scheduling traps that extend their time to degree.

Because college classes are concentrated between 8 A.M. and 4 P.M., working students face severe scheduling conflicts. A large percentage of students work late evenings or overnight, which undermines their sleep, study time, and academic performance. Among working students:

• 51 percent worked between 8 A.M. and 12 P.M.;
• 73 percent worked between 12 P.M. and 6 P.M.;
• 61 percent worked between 6 P.M. and 10 P.M.;
• 23 percent worked between 10 P.M. and 8 A.M.

Sophie Schmidt worked thirty hours a week at unpredictable hours, resulting in Bs and Cs, reliance on sleep during class, and an inability to maintain a steady 15-credit load.

Satisfactory academic progress standards and GPA requirements can backfire by forcing struggling students to reduce course loads. To protect financial aid from termination under the 2.0 minimum GPA rule, vulnerable students strategically lower their credit load after a poor semester. Celina took only 12 credits instead of a full load to boost her GPA with three science classes and protect her $3,100 Pell Grant from satisfactory academic progress penalties.

Dropping to part-time status incurs severe financial penalties because living costs do not scale linearly with credit hours. Federal rules require 12 credits for full-time Pell Grant status and enforce a 50 percent reduction in Pell Grant amounts for part-time enrollment. Chloe Johnson realized that taking extra classes solely to maintain full-time financial aid status was driving her backward financially and academically, ultimately leading to her academic dismissal.

10 Key Ideas

1. The traditional path to economic mobility through higher education has broken down because skyrocketing college costs and stagnant family incomes outpace federal financial aid.
2. Drastic cuts in state appropriations for public higher education have forced colleges to raise tuition and shift the financial burden directly onto students.
3. A rigorous mixed-methods study tracking 3,000 students reveals the real-world impact of financial constraints and targeted grant interventions on college success.
4. The financial aid process is overly complex, relies on flawed living allowances, and features rigid parental dependency rules that disadvantage independent students.
5. Because financial aid fails to cover total costs, low-income students are increasingly forced to take on risky loans, driving the modern student debt crisis.
6. Racial disparities in wealth heavily drive student borrowing patterns, making low-income African American students disproportionately indebted and vulnerable to dropping out.
7. Severe financial shortfalls force low-income students to endure chronic food insecurity, housing instability, and extreme psychic stress that impair academic performance.
8. Financial aid policies ignore the reality that low-income students frequently send money and time back to their families, which directly undermines their college retention.
9. Low-income students are highly motivated, but rigid outside employment and satisfactory academic progress rules force them into scheduling traps that extend their time to degree.
10. Fixing the broken higher education system requires replacing the current inadequate financial aid model with a streamlined Financial Aid 2.0 framework that covers the full cost of college attendance for everyone.