Association for Public Policy Analysis & Management

In the United States, the price for college has increased dramatically over the past few decades, even as postsecondary expenses climbed, but there has been little attention to how this has shaped family finances. Relying on data from the Consumer Expenditure Survey, this study considers the pattern in household investments in their children’s higher education over time and across the income distribution. Building on prior research on parental investment, it tests two pathways that may shape distinct investment strategies among families with different income levels. Although parents’ investment in college remained stable between 1996 and 2016, the income-based differences in parental spending widened over this time period. Yet, in both 2006 and 2016, the households with the highest 20% of income contributed more to their children’s college education than they did in 1996. In contrast, households earning less did not increase their total college expenditures, leading to a widening gap in contributions towards college across the income distribution. Previous work considered the possibility that changes in the share of household expenditures spent on college may indicate shifting norms and priorities about how to allocate money. As with total college expenditures, the share of household spending that went towards children’s college remained stable between 1996 and 2016, indicating that strong norms about the importance of postsecondary education continue to define families’ views on college. Although normative differences in investment exist across income groups when it comes to children’s expenses prior to age 18 (Schneider et al. 2018), this is not the case for college-related expenses. Instead, the share of household expenditures put towards college remained consistent across the income distribution over this time period.

These results have implications for equality of opportunity generally, and financial aid policies more specifically, though it is difficult to make claims without data on students’ academic performance or more specific college characteristics. If the purpose of financial aid is to even the economic playing field at the college-level, then these findings suggest that this goal is being achieved to some degree since the highest earning households spend more on college than lower-income households, but they have similar shares of college expenditures relative to their total spending. However, if financial aid is also supposed to acknowledge the cumulative disadvantage experienced over the life course, then it seems questionable to deem it a success when families spend equal shares of their expenditures on college regardless of their level of income, especially when middle-income families describe the painful financial decisions they make to provide college opportunities to their children. Considering parents’ financial investment into college provides an opportunity to reassess the ways in which society is failing young adults and their families by providing unequal access to opportunities across the income distribution.