The Economic Context

Much has changed in the economy since the creation of federal higher education programs. When Congress passed the Higher Education Act (HEA) in 1965, the United States had a thriving middle class, but too many lived in poverty and were unable to access good jobs. The HEA was one of a slew of Great Society programs that aimed to level the playing field of economic opportunity, particularly for those born into poverty. The student financial aid programs created under the HEA were designed to ensure that any American able to get into college could go, no matter what their economic background. But in the late 1960s, a college education was not a prerequisite for economic security. Quite the contrary; more than 80 percent of workers with only a high school diploma lived in middle- or upper-income households. College graduates generally earned more than those without degrees, but not that much more. In the early 1970s, young adults (ages 25–32) with bachelor’s degrees made about $7,500 more a year than the average high school graduate. The middle class was large, secure, and included a variety of entry points for workers with different levels of education.  

Today, the U.S. looks very different. The middle class has shrunk and grown more precarious while the wealth gap between upper-income Americans and everyone else has widened significantly. The racial wealth gap between Black and white families is even more stark. The group that has suffered the steepest losses in income status over the last 50 years are adults with only a high school diploma. These adults are significantly more likely to experience bouts of poverty than their counterparts with college degrees, as well as periods of unemployment and underemployment.

As a growing share of jobs—particularly good jobs with benefits—require a bachelor’s degree, the earnings gap between those with college degrees and those without today has ballooned to nearly $20,000 a year for young Americans. The shift up in educational requirements has exacerbated inequality, as Black, brown, and low-income people often struggle to afford higher education and are forced to take on more debt, or worse, never enroll and therefore miss out on the earnings premium of a college degree. Indeed, the college degree has become a stark dividing line in American society and the middle class has become smaller and less secure. It is no wonder that policymakers, the workforce community, community colleges, and others are desperate for new ways to help people gain the skills they need to be successful in today’s economy.