Wealth Inequalities In Education

To feel the pain of the tightening connection between education and wealth inequalities, one need look no further than state-level higher education reforms. In particular, the Michigan Education Trust (MET) college savings account policy reveals how the ongoing tragedy of exorbitant higher education costs prevents the poor from saving for college. Thousands of financially disadvantaged Michigan students have already attended college thanks to the MET, yet thousands still have not. However, families who have few marketable assets have little money and, consequently, little incentive to deposit money in MET savings accounts. Lacking objects of monetary value such as homes and cars, sellable for profit, and liquid assets like saveable wages, impoverished

families see insufficient returns on their investments. Moreover, in Michigan, middle-class jobs have shifted from motor vehicle assembly to high-technology and service industries in Michigan, raising academic job qualification standards. Most uneducated families without steady manufacturing jobs need to believe in college to realize prosperity. Yet, since the Trust does not cover all college expenses, impoverished Michigan families still struggle to send their children to college. Strengthened efforts in conjunction with the MET to build physical, liquid and psychological assets will make college possible for more working-class and poor Michiganders.
With statewide and national declines in median family wealth, the MET’s inadequate coverage of high college living costs keeps poor students from attending college.

Today, the percentage of adult Michigan residents (25 and over) with at least a Bachelor’s degree of 26.4% is still slightly below the national average of 29.3%, reflected in the socio-economic barrier of the widening family wealth gap. Federal Reserve Bank data show that the gap in median family wealth widened among families with college education against those without it. Between 1989 and 2013, families holding 2 and 4-year college degrees experienced a slight median wealth increase from $266,740 to $273,488, those with merely high school diplomas or equivalent felt a slight median wealth decrease from $149,182 to $95,072 and those with less than a high school diploma or equivalent experienced a dramatic median wealth decrease from $67,730 to $37,766. Thus, over the past few decades, many indigent families in Michigan and the rest of the U.S. have incurred greater debts than assets and therefore cannot save up for college through policies like the MET. Given that the MET, a 529 Prepaid Tuition Plan, does not cover room & board costs for students “who are enrolled at least half-time,” which at the state’s flagship university averages $10,872, poor families must pay unaffordable living costs. Therefore, although the MET is an asset-building initiative where families start savings accounts to send children to

college, it lacks the comprehensive coverage of costs that would allow struggling families to pool enough savings to pay for college.
As noted above, the Michigan Education Trust is only a prepaid tuition plan into which families and students deposit savings, moving account holders towards but not guaranteeing college attendance.

According to the state, the MET “allows for the pre-purchase of tuition based on today’s rates and then paid out at the future cost when the beneficiary is in college.” Families pay contributions as low as $15 into a mass conglomerate of savings that the state government redistributes to cover its members’ tuitions. The government self-reports that 2,163 students attended college thanks to the MET as of September 30, 2015. However, likely due to the fact that students and parents incur room and board expenses, the statistics also show that 371 students under contract did not attend college and 2,541 contracts had been terminated as of that date. If the state government sought to fully assuage the disparity in educational attainment in Michigan, they would go beyond contracting families into dubious payments and instead make public colleges and universities free to

attend.
In 1987, former Democratic Governor James Blanchard optimistically instituted the MET to move towards a more equitable distribution of opportunity among all of his constituents. Blanchard recognized that, with the shift from manufacturing to services, opportunities were more easily available to workers who had advanced technical skills and training and those who had no college education lacked these qualifications. Therefore, Blanchard strove to promote the Trust. He and the State Legislature believed that providing families with “advanced tuition payment contracts” to sign, “without further tuition cost” on behalf of “qualified beneficiary” students once entered into the Trust would benefit “public health, safety, and welfare.” Yet, his successor, the fiscally conservative Republican Governor John Engler, tried to cut taxes and downsize the government which resulted in defunded higher education with the early 1990s recession. With the turn of the 21st century, the political pendulum swung the governorship back into the Democratic hands of Jennifer Granholm, yet, appealing to public opinion, she continued Engler’s fiscally conservative negation of the MET as it again saw cuts. Since the current Republican Governor Rick Snyder’s administration cut back $213 million in public spending in fiscal year 2012 on the token MET funds, destitute households watch today as their already-slim prospects of upward social mobility crumble beneath Snyder and President-elect Trump. Throughout the recent past, politicians have undone financial stability for impoverished people by cutting back the meager MET, leaving the poor unable to afford college.