Center on Assets, Education, and Inclusion

According to Shapiro, the American Dream “is the promise that those who work equally hard will reap roughly equal rewards” (Shapiro, 2004, p. 87); that is, the American Dream holds that this country is a meritocracy where effort and ability are the primary determinants of success. Institutions provide the economic conditions that make it possible for people to believe that their hard work and ability will determine their success or failure. This task is facilitated by Americans’ strong desire to feel as though their destiny can be controlled and that institutions will ‘echo’ their own contributions, rather than work against them.1 Primed to look for evidence of this ‘effort plus ability equals outcomes’ equation, Americans cling to this ideal, even as it recedes in reality for many. There is no evidence that Americans today are less capable or less committed than in previous generations, in the aggregate. Instead, particularly in today’s highly specialized, technology driven, global world, the upward mobility that animates the American Dream is only possible if effort and ability are combined with institutional might.

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Higher education plays a critical role in the U.S. economy, creating a ladder of economic opportunity for American children, especially for those in poverty. However, despite our collective belief in an American dream of equitable opportunities for all, higher education today increasingly reinforces patterns of relative privilege, particularly as students rely more and more on student loans to finance college access. As borrowing reduces the return on a college degree— by failing to support strong educational attainment and by compromising post-graduation financial security—the inequity of our financial aid system is laid bare. By supporting and investing in asset-based savings approaches for all U.S. children, we have the potential to deliver superior outcomes and strengthen the American dream.

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Changes in financial aid policies raise questions about students being asked to pay too much for college and whether parents’ college savings for their children helps reduce the burden on students to pay for college. Using trivariate probit analysis with predicted probabilities, in this exploratory study we find recent changes in the financial aid system place a higher responsibility on African American, Latino/Hispanic, and moderate-income students to pay for college themselves. We also find when parents open a savings account, start a state-sponsored savings plan, or open a college investment fund students are less likely to pay for college with student contributions. Therefore, we suggest in addition to grants and scholarships, policies that encourage accumulation of savings for college among minority and lower income families may help reduce the college cost burden they experience.