Diploma gap between rich and poor

When people get more education, they become more productive and help strengthen the entire U.S. economy. So it is discouraging to see that students from wealthy families are increasingly more likely to graduate from college than are those from poor families. This perpetuates inequality from one generation to the next and limits the economic benefits that could come if a wider swath of the population earned college degrees.

The widening gap in college completion rates is documented in a paper by economists Martha Bailey and Susan Dynarski of the University of Michigan. Looking at children born in the early 1960s, the researchers found that only 5 percent of children from families in the lowest-income quartile completed college, while 36 percent of those from families in the highest-income quartile did.

For children born around 1980, the college completion rate among low-income students rose to 9 percent, but among high-income students it jumped to more than half (54 percent). In other words, over two decades, the college income gap widened to 45 percentage points from 31 percentage points. This widening was observed even after the researchers accounted for differences in students’ cognitive skills.

It’s tempting to conclude that the advantages of wealth and income have simply intensified, so the odds are increasingly stacked against poorer students. No doubt that’s true to some extent, but Bailey and Dynarski show that most of the change has been driven by trends among female students. The gap between rich and poor in both college entry and college completion widened by almost twice as much for women as it did for men. (An astonishing 85 percent of girls born in well-off families around 1980 entered college.)

It can’t simply be that wealthy families directly or indirectly buy advantages for their children. If this were the case, why wouldn’t it work as well for sons as for daughters?

So what has happened to widen the college gap, and what can we do about it?

Bailey and Dynarski focus on two crucial pieces of the picture: inequality in high school graduation rates and inequality in college completion among students who begin college.

Gaps in high school graduation by income, the researchers find, account for about half of the gap in college entry rates. After all, college entry isn’t an option for people without a high school degree. Among those who do finish high school, though, the percentage who go on to enter college has risen to about 70 percent among those born around 1980 - up from about half of those born around 1960. So raising high school graduation rates among low-income students could make a difference.

One way to do this has been suggested by the Hamilton Project at the Brookings Institute: compulsory schooling. In a September 2012 paper for Hamilton, economists Philip Oreopoulos and Derek Messacar of the University of Toronto note that about half of low-income and minority students don’t graduate with their high school class. They propose that all states require students to stay in school until age 18. This would make more low-income students eligible to attend college.

To be sure, a high school degree won’t matter much if the student isn’t adequately prepared for college, which is why Oreopoulos and Messacar couple their suggestion with other reforms to improve educational quality. To get more students to enroll in college, the financial aid process must be simplified.

The final, and perhaps most perplexing, problem to solve involves “persistence” - a college student’s likelihood of completing a degree. Less than 60 percent of students enrolled full-time at four-year colleges graduate within six years, the College Board has shown, and less than 30 percent of full-time students at two-year colleges graduate within three years.

Not surprisingly, but somewhat depressingly, those who don’t finish are disproportionately poor. Among those born around 1980, only about a third of college students from low-income families got their degrees, compared with about two- thirds of those from affluent families.

As another indication of the challenge, the college completion report from the KIPP charter school network shows an impressive 95 percent of KIPP students receive their high school degree, and 89 percent enroll in college - but then less than 40 percent graduate from college. This is a crucial and challenging problem. The College Board’s College Completion Agenda recommends some strategies to support and motivate students that might help, starting in preschool and continuing after they reach college, but the truth is that no one yet knows what will work.

At its heart, the widening gap in college completion rates between rich and poor students undermines the traditional American notion of equal opportunity. It also represents a missed economic opportunity. Raising graduation rates among low- income students would significantly increase average educational attainment in the U.S. and, in so doing, bolster productivity.

*The author is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup and a former director of the Office of Management and Budget in the Obama administration.

by Peter Orszag