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Have It Your Way

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What's on the Agenda For Student Aid

College affordability is high on the agenda for the newly elected Democratic leadership in Congress, and that could mean good news for families worried about the rising cost of college.

Among the measures Democrats have proposed is halving the interest rate on some federal student loans, which could save students thousands of dollars over the term of their loans. Parents could benefit from a proposal to allow tax deductions for tuition paid by families earning up to $160,000 a year. And lower-income families could get added help from a possible expansion of the federal Pell Grant program.

Rep. Nancy Pelosi, the likely new House speaker, has set college affordability as one of a handful of priorities in the Democrats' New Direction for America program. To build momentum, Democrats are including the proposed student-loan rate cut among a number of measures they plan to introduce on the first day of the new Congress and to pass within the first 100 hours Congress is in session. (Other measures on the "100 hours" list include raising the minimum wage and rolling back subsidies for big oil companies.)

The Democrats' college-affordability proposals are expected to gain backing from outside the party. "Pelosi has picked apple-pie issues in higher ed that both sides of the aisle can come around," says Sarah Flanagan, vice president for government relations at the National Association of Independent Colleges and Universities. "But the debate will be whether it's the best use of scarce federal resources," she says. Indeed, the Republican-led Congress this year lopped nearly $12 billion from student-lending programs as part of a deficit-reduction act, infuriating Democrats.

Some of the proposals may draw opposition from banks and other for-profit lenders if the interest rate reductions eat into their profits. While Democrats haven't yet said so, "we are nervous that they will attempt to...reduce lender returns," says John Dean, special counsel for the Arlington, Va.-based Consumer Bankers Association, a group of student-loan providers.

Some experts also say the Democrats' proposals could encourage colleges to raise tuition further. "Anytime you make it easier, cheaper for kids to borrow money...that tends to push prices up," says Richard Vedder, director of the Center for College Affordability and Productivity in Washington.

Despite the efforts to make higher education more affordable, paying for college likely will continue to become increasingly difficult for many students. Average total tuition and fees at four-year private colleges increased 5.9% to $22,218 in the current academic year. The average undergraduate leaves school more than $20,000 in debt, compared with about $16,000 in 1999-2000, according to an analysis of the Education Department's National Postsecondary Student Aid study.

What's more, caps on how much federal assistance is available per student means that students could continue to rely more heavily on private student loans, which typically carry higher interest rates. In the last academic year, private student lending, which is separate from federal loans distributed through banks, amounted to about $17 billion in new loans, up more than three times since 2001-02. Federal student loans originated in the 2005-2006 academic year totaled $69 billion.

The federal government's student-lending programs include the popular Stafford loans, which allow students to borrow as much as $23,000 for an undergraduate education and $65,500 for undergraduate and graduate school combined. Other programs include the Parent Loan for Undergraduate Students and the Pell Grant, which gives needy students money that doesn't have to be repaid. Loans are either issued directly to students or are distributed through private lenders.

Democratic leaders may scale back some of their ambitions in a bid to help move measures through Congress. The New Direction document calls for cutting interest rates in half for student and parent loans. But now Democratic aides say lawmakers might seek to cut rates only for certain student loans. Rep. George Miller (D., Calif.), expected to be named leader of the House education committee, said in a postelection statement last week that among the "first three priorities" for the committee is to improve college affordability by cutting interest rates in half on student loans.

Stafford loans currently carry an interest rate of 6.8%. For a typical $20,000 loan over 10 years, cutting that rate in half would save a student about $4,000, according to an analysis by Mark Kantrowitz, publisher of FinAid.org.

Democrats also want to raise the limit that needy students can receive from the Pell Grant program to $5,100 a year from $4,050, which has been the limit for four years. Sen. Edward Kennedy (D., Mass.), who will head the Senate education committee, has unsuccessfully tried to raise that cap in recent years. President Bush in his 2000 election campaign spoke about an increase in the Pell Grant program, when he said he would raise the limit to $5,100, but just for first-year students. That promise never materialized.

Rep. Miller and Sen. Kennedy helped introduce legislation last year that would have provided financial incentives for schools that encourage students to borrow directly from the government, rather than obtain federal loans that are distributed through private banks. The lawmakers are expected to revive the idea. Currently, just one-fourth of federal loans are made directly to students. Democrats point to reports by the Congressional Budget Office and the Government Accountability Office that say direct lending saves the government money, though those reports are contested by the loan industry.

Under the proposal, the government would hand over a portion of the money that it saves to the schools, on condition that it be directed to need-based student-aid programs.

Democrats also want to restore a tax deduction, which expired last year, that used to benefit families who earned up to $160,000 a year. That measure would allow tuition-paying families to deduct as much as $4,000 a year. Other existing tax incentives, including the Hope and Lifetime Learning programs, provide tax credits for families with annual incomes of up to $107,000.

"The bottom line is these proposals will require an infusion of money," says Mr. Kantrowitz of FinAid.org. "So they will need to either increase taxes or cut costs elsewhere to pay for it."

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Is Admissions Bar Higher for Asians At Elite Schools?

Though Asian-Americans constitute only about 4.5% of the U.S. population, they typically account for anywhere from 10% to 30% of students at many of the nation's elite colleges.

Even so, based on their outstanding grades and test scores, Asian-Americans increasingly say their enrollment should be much higher -- a contention backed by a growing body of evidence.

Whether elite colleges give Asian-American students a fair shake is becoming a big concern in college-admissions offices. Federal civil-rights officials are investigating charges by a top Chinese-American student that he was rejected by Princeton University last spring because of his race and national origin.

Meanwhile, voter attacks on admissions preferences for other minority groups -- as well as research indicating colleges give less weight to high test scores of Asian-American applicants -- may push schools to boost Asian enrollment. Tuesday, Michigan voters approved a ballot measure striking down admissions preferences for African-Americans and Hispanics. The move is expected to benefit Asian applicants to state universities there -- as similar initiatives have done in California and Washington.

If the same measure is passed in coming years in Illinois, Missouri and Oregon -- where opponents of such preferences say they plan to introduce it -- Asian-American enrollment likely would climb at selective public universities in those states as well.

During the Michigan campaign, a group that opposes affirmative action released a study bolstering claims that Asian students are held to a higher standard. The study, by the Center for Equal Opportunity, in Virginia, found that Asian applicants admitted to the University of Michigan in 2005 had a median SAT score of 1400 on the 400-1600 scale then in use. That was 50 points higher than the median score of white students who were accepted, 140 points higher than that of Hispanics and 240 points higher than that of blacks.

Roger Clegg, president and general counsel of the Center for Equal Opportunity, said universities are "legally vulnerable" to challenges from rejected Asian-American applicants.

Princeton, where Asian-Americans constitute about 13% of the student body, faces such a challenge. A spokesman for the Department of Education's Office for Civil Rights said it is investigating a complaint filed by Jian Li, now a 17-year-old freshman at Yale University. Despite racking up the maximum 2400 score on the SAT and 2390 -- 10 points below the ceiling -- on SAT2 subject tests in physics, chemistry and calculus, Mr. Li was spurned by three Ivy League universities, Stanford University and Massachusetts Institute of Technology.

The Office for Civil Rights initially rejected Mr. Li's complaint due to "insufficient" evidence. Mr. Li appealed, citing a white high-school classmate admitted to Princeton despite lower test scores and grades. The office notified him late last month that it would look into the case.

His complaint seeks to suspend federal financial assistance to Princeton until the university "discontinues discrimination against Asian-Americans in all forms by eliminating race preferences, legacy preferences, and athlete preferences." Legacy preference is the edge most elite colleges, including Princeton, give to alumni children. The Office for Civil Rights has the power to terminate such financial aid but usually works with colleges to resolve cases rather than taking enforcement action.

Mr. Li, who emigrated to the U.S. from China as a 4-year-old and graduated from a public high school in Livingston, N.J., said he hopes his action will set a precedent for other Asian-American students. He wants to "send a message to the admissions committee to be more cognizant of possible bias, and that the way they're conducting admissions is not really equitable," he said.

Princeton spokeswoman Cass Cliatt said the university is aware of the complaint and will provide the Office for Civil Rights with information it has requested. Princeton has said in the past that it considers applicants as individuals and doesn't discriminate against Asian-Americans.

When elite colleges began practicing affirmative action in the late 1960s and 1970s, they gave an admissions boost to Asian-American applicants as well as blacks and Hispanics. As the percentage of Asian-Americans in elite schools quickly overtook their slice of the U.S. population, many colleges stopped giving them preference -- and in some cases may have leaned the other way.

In 1990, a federal investigation concluded that Harvard University admitted Asian-American applicants at a lower rate than white students despite the Asians' slightly stronger test scores and grades. Federal investigators also found that Harvard admissions staff had stereotyped Asian-American candidates as quiet, shy and oriented toward math and science. The government didn't bring charges because it concluded it was Harvard's preferences for athletes and alumni children -- few of whom were Asian -- that accounted for the admissions gap.

The University of California came under similar scrutiny at about the same time. In 1989, as the federal government was investigating alleged Asian-American quotas at UC's Berkeley campus, Berkeley's chancellor apologized for a drop in Asian enrollment. The next year, federal investigators found that the mathematics department at UCLA had discriminated against Asian-American graduate school applicants. In 1992, Berkeley's law school agreed under federal pressure to drop a policy that limited Asian enrollment by comparing Asian applicants against each other rather than the entire applicant pool.

Asian-American enrollment at Berkeley has increased since California voters banned affirmative action in college admissions. Berkeley accepted 4,122 Asian-American applicants for this fall's freshman class -- nearly 42% of the total admitted. That is up from 2,925 in 1997, or 34.6%, the last year before the ban took effect. Similarly, Asian-American undergraduate enrollment at the University of Washington rose to 25.4% in 2004 from 22.1% in 1998, when voters in that state prohibited affirmative action in college admissions.

The University of Michigan may be poised for a similar leap in Asian-American enrollment, now that voters in that state have banned affirmative action. The Center for Equal Opportunity study found that, among applicants with a 1240 SAT score and 3.2 grade point average in 2005, the university admitted 10% of Asian-Americans, 14% of whites, 88% of Hispanics and 92% of blacks. Asian applicants to the university's medical school also faced a higher admissions bar than any other group.

Julie Peterson, spokeswoman for the University of Michigan, said the study was flawed because many applicants take the ACT test instead of the SAT, and standardized test scores are only one of various tools used to evaluate candidates. "I utterly reject the conclusion" that the university discriminates against Asian-Americans, she said. Asian-Americans constitute 12.6% of the university's undergraduates.

Jonathan Reider, director of college counseling at San Francisco University High School, said most elite colleges' handling of Asian applicants has become fairer in recent years. Mr. Reider, a former Stanford admissions official, said Stanford staffers were dismayed 20 years ago when an internal study showed they were less likely to admit Asian applicants than comparable whites. As a result, he said, Stanford strived to eliminate unconscious bias and repeated the study every year until Asians no longer faced a disadvantage.

Last month, Mr. Reider participated in a panel discussion at a college-admissions conference. It was titled, "Too Asian?" and explored whether colleges treat Asian applicants differently.

Precise figures of Asian-American representation at the nation's top schools are hard to come by. Don Joe, an attorney and activist who runs Asian-American Politics, an Internet site that tracks enrollment, puts the average proportion of Asian-Americans at 25 top colleges at 15.9% in 2005, up from 10% in 1992.

Still, he said, he is hearing more complaints "from Asian-American parents about how their children have excellent grades and scores but are being rejected by the most selective colleges. It appears to be an open secret."

Mr. Li, who said he was in the top 1% of his high-school class and took five advanced placement courses in his senior year, left blank the questions on college applications about his ethnicity and place of birth. "It seemed very irrelevant to me, if not offensive," he said. Mr. Li, who has permanent resident status in the U.S., did note that his citizenship, first language and language spoken at home were Chinese.

Along with Yale, he won admission to the California Institute of Technology, Rutgers University and the Cooper Union for the Advancement of Science and Art. He said four schools -- Princeton, Harvard, Stanford and the University of Pennsylvania -- placed him on their waiting lists before rejecting him. "I was very close to being accepted at these schools," he said. "I was thinking, had my ethnicity been different, it would have put me over the top. Even if race had just a marginal effect, it may have disadvantaged me."

He ultimately focused his complaint against Princeton after reading a 2004 study by three Princeton researchers concluding that an Asian-American applicant needed to score 50 points higher on the SAT than other applicants to have the same change of admission to an elite university.

"As an Asian-American and a native of China, my chances of admission were drastically reduced," Mr. Li claims in his complaint.

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Education
College Admissions: the Sequel

Like a lot of teenagers, Neil Verma is practically obsessed with getting into the right college. He spends as many as four hours a night studying to make sure his grades impress the admissions office. He's researching the best teachers to ask for recommendations. And he's constantly checking his to-do list so he won't miss the application deadlines.

But Mr. Verma's not a high-schooler. He's already in college, attending the University of Miami as a freshman. He's putting himself through the admissions wringer all over again this year, hoping to be accepted as a transfer student at Dartmouth or the University of Chicago. Both schools were his top choices and turned him down last year. "I have to try," he says.

Applying for a transfer used to be mainly for students who concluded they weren't happy at their current college. But with competition for top schools so fierce, some students are approaching the transfer as simply an extension of the admissions process -- one more shot at getting into the best institution possible.

For these students, freshman year of college looks more like senior year of high school. They're focusing so intently on factors they think will boost their transfer applications -- touring campuses on weekends, getting tutors to help them refine their personal statements -- that some traditional freshman-year activities, like experimenting with new course subjects or simply acclimating to living on their own, are often sidelined. So high is the anxiety surrounding the name on the diploma that some kids are even making the switch from supposedly lesser Ivies to Harvard or Yale.

Just as soaring first-time applications are making it harder to get into college in the first place, an increase in transfer applications is upping the competition there, too. Brown University this year admitted 44 transfers out of about 1,100 applicants, compared with 283 admitted last year out of 823. Williams College has a message on its Web site saying it has been accepting fewer candidates in recent years. And in surveys of students who transferred into the University of Pennsylvania, 15% say they came because they were rejected as high-school seniors, three times the number who said that a decade ago. "Sometimes the second or third time's the charm," says Lee Stetson, the school's dean of admissions. "I give them credit for persisting like that."

With the contest tougher now, it bears knowing from one year to the next where the odds are best. Georgetown, for example, is on a four-year push to increase enrollment by a total of 375 students, including more slots for transfers. Harvard's transfer pool has widened by as much as 20 spots in recent years, thanks to an expanded study-abroad program leaving more dorm rooms vacant. Cornell has "guaranteed transfers," a little-known loophole that holds spots for the best of its rejected high-school seniors.

The number of transfers a school admits is typically based on a statistical formula, depending on how many students the campus anticipates losing for a semester or two to study-abroad programs and how many of the students admitted to the freshman class actually decide to attend. Transfers benefit when fewer freshmen accept the invitation.

Not long after the fall convocation at the University of Tulsa, when students gathered to hear President Steadman Upham praise the class of 2010 as lifelong learners and future leaders, Tom Fagan's thoughts started to stray. The freshman was thinking about the University of Michigan, which had rejected him in April. Within a few weeks of arriving at Tulsa, he'd set a transfer plan in motion.

Now, the highlights of his freshman year will make their way onto his transfer application. He joined the school's marching band as a trombone player -- which he thinks could appeal to Michigan, a Big Ten football school with a winning band. He's planning to work on his foreign-language skills by spending next summer with a host family in Berlin. He's volunteering in the Big Brother program and has added a fifth class to his roster, economics, when many freshmen stick with just four classes and save more specialized subjects for later. "It's a pain," he says.

To avoid another rejection by Michigan, the 18-year-old is researching how to increase his odds. Though he hopes to major in business, he's thinking of applying to the university's College of Literature, Science, and the Arts instead of its competitive Ross School of Business. Later, he says, he can move to the business school as a cross-campus transfer, which he thinks will be easier to do once he's already enrolled at Michigan. To keep his options open, he's considering applying to the University of Wisconsin, too.

Mr. Fagan's mother, Olga Fagan, says she's also feeling the stress all over again. "I'm worried that he's going to have his heart set on leaving and may not get into places he'd like," she says. Mr. Fagan, meanwhile, says he's open to the possibility of staying at Tulsa. The family will have a Thanksgiving summit about the issue when he goes home to Midland, Mich., and Ms. Fagan will encourage him to apply to at least four places so he can have some choices. "We just got him off to college," she says. "I'm just catching my breath."

Amy Sack, the president of Admissions Accomplished in Trumbull, Conn., which works with college applicants on everything from mock interviews to résumé polishing, offers a transfer package starting at $1,000 up to $5,000. The upper tier includes weekly one-hour meetings for up to 10 applications over a three-month period.

Ms. Sack says she recently helped get one student at Smith College a transfer to Brown, Cornell and the University of Chicago by having her retake the SATs (the student improved her scores by more than 100 points) and pushing her to keep a 4.0 grade-point average. "I always tell students, if you have a dream, don't give up on your dreams when you're 17," she says.

Ms. Sack is telling clients Tulane in New Orleans is a good bet this year for transfers because of its decline in enrollment after Hurricane Katrina. (A Tulane spokesman says the school's quality is still high even though its numbers are down.) Stanford, says Ms. Sack, is a tough one -- the school admitted 10.9% of all its applicants for fall 2006, but just 5.1% of its transfer applicants last year. "There are schools that are more transfer-friendly than others," she says, "but that changes from year to year."

Chuck Hughes, a senior admissions officer at Harvard from 1995-2000 who now runs Road to College, a college counseling service, says he warns students about small liberal arts schools, since their transfer acceptance rates are low. Case in point: Middlebury College, which last year accepted one student as a transfer, despite receiving 230 applications.

James Corp has started his school shopping from scratch. The 18-year old is a freshman at the University of Michigan, but he doesn't plan on staying there long. One option is Cornell, where he was offered a guaranteed transfer -- a conditional acceptance to enroll a year later pending good grades -- after being rejected last year.

He says he thinks it would be exciting to be the first member of his family to attend an Ivy League school. But he's not stopping at Cornell -- he's also expanding the search, and recently added to his transfer application list the Tisch School of the Arts at New York University.

During study breaks between his English, lighting-design and intensive French classes, he's revising his application essays -- he may try to go to NYU in the spring, which means making an application deadline next month -- and is tracking down his high-school transcripts. All the while, he's trying to stay close to his 3.99 high-school GPA.

The teenager says some nights he gets less than five hours of sleep, going to bed around 1 a.m. after studying and working on his personal essay for his applications. While his friends have memorized the Michigan fight song -- "The Victors" -- and sing it at football games on the weekends, Mr. Corp says he only just learned the words. "I don't really feel like it's my school," says the freshman from Novi, Mich., who says he's been to one football game all year, didn't stay through the fourth quarter and wore the colors of the opposing team, Vanderbilt, by accident.

He's told a few of his friends what his transfer plans are, and some are starting to feel rebuffed: "They kind of feel betrayed, like you think you're too good for Michigan."

Mr. Corp's mother, Shawne Duperon, says she worries that he will get uprooted as soon as he starts to feel at home at Michigan, leaving him physically and emotionally exhausted. Despite her reservations, and the fact that her son would be giving up a scholarship at Michigan, she also says there's a part of her that wouldn't mind if he switched to Cornell. "Part of me would love to be able to say, 'I've got a kid at an Ivy League school,' " she says. "How cool would that be?"

Recruiters say they keep their eyes out for transfers as they review new graduates for positions. Jean Wyer, a principal at PricewaterhouseCoopers, the accounting and consulting firm, says she'll always ask if she sees a student has transferred and she'll "listen carefully to the answer" to make sure the student wasn't simply trying to load his or her résumé for the sake of status.

Morgan Stanley's Vic Garber, managing director for fixed income, who also runs recruiting for that division, says often when he sees a transfer on an applicant's résumé, it shows the candidate has "hustle" and the drive to get to their dream school. "It shows a certain amount of dedication to a purpose."

But Thomas Caleel, director of M.B.A. admissions and financial aid at the Wharton School of the University of Pennsylvania, says he expects transfer students to offer a compelling reason for their switch. "Take us beyond just the ratings game," he says.

Peter Van Buskirk, vice president of college-planning solutions at Peterson's, the education and career-guidance company, tours the country presenting an interactive workshop to high-school students and their parents entitled "Winning the College Admission Game." Where a decade ago, parents at the workshop would privately ask him about transferring so that other parents wouldn't hear, now they're openly inquiring about using transferring to get into the nation's top schools.

But part of the transfer pressure is coming from the students themselves. Carol Lunkenheimer, Northwestern University's dean of undergraduate admission, says parents often call to ask questions for freshman applications, while students call for transfer information. "They're doing their own work," she says. "It tells me they're really interested."

Historically, most transfer students go into the larger, state schools, often from community colleges. Many of the elite private schools have high retention rates and accept fewer transfers. But with the strategy increasingly common, the National Association for College Admission Counseling says that for the first time this year, it will include several transfer-related questions in its annual survey of 2,400 four-year institutions, asking about the criteria schools use to pick transfer candidates.

For some students, one Ivy acceptance isn't enough if the nod doesn't come from their dream Ivy. "I think for a lot of people, Harvard is a dream school -- for me it definitely was," says Abigail Wright, who arrived as a transfer to Harvard from Columbia last year. While more than 10 of her classmates from prestigious Milton Academy got into Harvard as seniors, she was waitlisted. "It didn't feel fantastic," she says. She had been pleased with her college applications -- she felt her essay, which she'd written over a couple of weekends about the epiphany she experienced after surviving a car crash, came out well -- but she was feeling burnt out.

At Columbia, she signed up for core classes in science and literature, as well as Latin and psychology. While she wrote for the school newspaper, she knew there were more activities she'd be interested in, like the radio station, that she didn't bother with -- she wasn't in the frame of mind to get too deeply embedded in the school.

She approached her Latin and literature professors -- teachers from her smallest classes who seemed to know her best -- for recommendation letters. "A lot of professors aren't necessarily familiar with the process. They ask you, 'Why would you want to transfer away from here?' "

Now at Harvard, the 20-year-old thinks it's ironic she transferred since she's realized she wants a career in broadcast news -- Columbia is known for its journalism school -- but she says her new school can enhance her career in the long run: "The name Harvard helps you get internships."

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By DAVID WESSEL

Why It Takes a Doctorate To Beat Inflation
October 19, 2006; Page A2. The Wall Street Journal. Vol. CCXLVIII No. 93

The typical American worker with a four-year college degree earns a lot more money than a similar worker who didn't go beyond high school -- 45% more.

Education does pay. But in today's economy, getting a bachelor's degree is no longer a guarantee of raises big enough to beat inflation.

Although the best-paid college grads are doing well, wages of college grads have fallen on average, after adjusting for inflation, in the past five years. The only group that enjoyed rising wages between 2000 (just before the onset of the last recession) and 2005 (the most-recent data available) were the small slice with graduate degrees.

Think about that: Even though the economy and productivity have been growing smartly, lots of workers who played by the rules and went the distance to get a four-year college degree aren't getting ahead.

How come? Labor's slice of the apple is smaller and corporate profits' slice is larger, but that's probably temporary. The more lasting trend: Labor's share has been sliced increasingly unevenly. The very best-paid workers are getting the bulk of the raises.

Wage inequality has been widening for a couple of decades; the trend didn't coincide with the election of President Bush. At first, Americans in the middle were gaining on those at the bottom, and Americans at the top were gaining on those in the middle, and so on, all at about the same pace.

But in the past decade, the gap between the bottom and the middle hasn't widened much while wages at the top have pulled away. The wage gap between those with business, law, medical or other postgraduate degrees has widened a lot more than the gap between college and high-school graduates. Even excluding capital gains, tax-return data crunched by Emmanuel Saez of the University of California at Berkeley show that the top 1% in the U.S. got 16% of all income in 2004, compared with 9% in 1984.

Before nitpicking emails arrive: No single set of numbers gives a complete picture. The data in this chart cover only cash wages -- not health benefits or pensions. If they were included, most of those inflation-adjusted minuses would turn to pluses. But inequality wouldn't disappear. The best-paid 20% of workers on private payrolls are three times as likely to have health insurance as those in the bottom 20%, and this tally doesn't count stock options and the like -- and you know who gets the bulk of those.

The question isn't whether the gap between winners and losers in the labor market is widening; it's why. And it's no longer as simple as saying: The more education one gets, the more one earns. Something more complicated is driving up pay at the top.

Explanations come in three strains, all of which have some merit. One, it's more socially acceptable than it was a generation ago for the top-tier chief executive, hedge-fund manager or baseball players to make an enormous amount of money. Two, the world has changed in ways that make the No. 1 or No. 2 -- whether a trial lawyer or a rock star -- much more valuable than No. 19 and 20. As technology has helped create superstars, the gap between Oprah's paycheck and those of local talk-show hosts is larger than ever.

And, three, there's the influence on supply and demand of globalization and technology. At the high end, sharply rising wages suggest demand for the most-educated workers is growing faster than the supply. "The very top is doing very well," says Harvard University labor economist Lawrence Katz. "It's changes in demand, combined with the fact that it's very hard to replicate a lot of that talent... and we haven't expanded the ranks of those professions as fast as we could."

At the bottom, where the supply is influenced by the ranks of unskilled immigrants and laid-off workers falling out of the middle class, demand for hotel workers, nursing aides, security guards and the like may be helping to prop up wages even though the minimum wage hasn't kept up with inflation.

It is in the middle -- where many four-year college graduates work -- that imports, overseas outsourcing and technology seems to be reducing U.S. employer demand most significantly, and thus restraining wages.

That is the kind of shift in the tectonic plates of the economy that produces political earthquakes.

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As Tuition Soars, Federal Aid To College Students Falls

At a time when employers say that almost every new job in the U.S. will require workers to have more than a high-school education, the chance that students at the bottom of the economic ladder can afford to finish college has taken a turn for the worse.

The College Board's latest annual reports on student aid and college pricing find that over the past five years tuition at public four-year universities has soared by a record-breaking 35% when adjusted for inflation. Meanwhile, spending on Pell Grants -- the biggest source of federal aid for low-income students -- fell for the first time in six years.

"There is no question that the bulk of the impact of that is falling on lower- and lower-middle-income students," says Donald Heller, a Pennsylvania State University professor who has studied access to higher education. "They are getting killed on the aid side, and they are getting killed on the tuition side."

The number of students from all income levels pursuing post-secondary education continues to grow. But to stay in school, educators say, low-income students are taking loans, using high-interest credit cards to pay tuition, working more hours, and opting for two-year schools.

Low-income students are choosing two-year colleges for financial reasons even though studies show more of them are academically qualified for four-year schools due to efforts by school districts to push them into tougher, college-prep courses. But only 23% of community college students earn a bachelor's degree -- a vital credential in today's workplace -- within six years, as compared with 63% of students at four-year institutions, according to the College Board, a New York-based nonprofit that administers the SAT college admissions test and analyzes higher-education data.

The shrinking Pell Grant funding "doesn't give us the chance to attend college and get the degree we need to get the earnings that we should," says Kennel Etienne, a former Pell recipient from Revere, Mass. Mr. Etienne, 23, has been struggling to earn money to return to college since he dropped out of Mount Ida College, in Newton., Mass., for financial reasons two years ago.

Pell Grants are often used as an index of how accessible higher education is to lower-income students. About $12.7 billion in Pell Grants were awarded for the 2005-2006 academic year, down 3% from $13.1 billion the previous academic year. The average grant per recipient slipped to $2,354 from $2,474. The decline came after the Bush administration rejiggered the eligibility formula: It reduced how much money families in many states were assumed to be paying in state and local taxes, which increased their after-tax incomes and made many ineligible for the grants.

The vast majority of the 5.4 million students receiving Pell Grants come from families earning less than $40,000 a year. Despite much debate in Congress, the value of the maximum Pell Grant, $4,050, hasn't budged in three years even as the price tag for attending a four-year public university has soared. The maximum Pell grant met 33% of the average price of tuition, fees, room and board at a public four-year school in 2005-06, down from 42% in 2001-02.

The increase in tuition and fees at the four-year publics was a relatively moderate 6.3% last year, or 2.4% after adjusting for inflation. But College Board data shows that the overall 35% inflation-adjusted increase since 2001-2002 is the biggest five-year jump since it began gathering such data in the 1970s. It's also more than triple the 11% inflation-adjusted increase at private colleges. Private colleges face many of the same cost increases as their public-sector brethren. Over the past five years, utilities costs for colleges and universities have risen by 72%, according to the College Board, while costs for employee benefits are up 31%.

Neither "student-aid funds nor family incomes are keeping pace with college prices," Gaston Caperton, the College Board president, said yesterday. "This is a serious problem that must be addressed."

About 35% of the nation's 15.2 million undergraduates attend four-year public universities and about 16% go to four-year private schools, according to the College Board. About 41% attend two-year public schools, with most of the rest going to for-profit colleges, such as the University of Phoenix.

The steep tuition increases for public colleges come as many state legislatures, facing growing pressure to fund other priorities such as Medicaid, prisons and primary and secondary education, have reduced in recent years appropriations for higher education on a per-student basis. State and local government appropriations were $5,825 per full-time student in 2004-2005, down from $6,846 per student in 2000-2001 after adjusting for inflation, the College Board said.

To compensate for the pressure on appropriations, four-year publics have raised tuition, making bargains harder to find. At the University of Texas at Austin, once considered one of the sector's best buys, tuition has increased by 47% over the past three years. Meanwhile, at California public universities, where the cost of attending was minimal until the 1990s, tuition and fees have soared by 40% in the past five years, to as much as $7,000 a year at the University of California campuses, the state's most selective schools.

The College Board reports come amid increasing debate over higher education policies that appear to favor affluent students. Many universities, seeking to boost their standing in the college rankings, have increasingly used their own resources to award merit aid to top-ranking students who have no financial need.

According to one recent study, only 10.8% of undergraduates at 19 leading public and private universities come from families in the bottom 25% of annual income. In recent months, both Harvard and Princeton said they planned to drop early admissions, saying that such programs, which are commonplace among selective colleges, favor the already-advantaged.

At the same time, corporate leaders concerned about the nation's future competitiveness are calling for students from a broader range of backgrounds to attend college. "We think it's critically important," says Arthur Rothkopf, senior vice president of the U.S. Chamber of Commerce. "We think 90% of the newly created jobs in this country are going to require some post-secondary education."

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