And yet, in a paradox of American life, at the very moment it's never been more important to have a quality higher education, the cost of that kind of that kind of education has never been higher. Over the past few decades, the cost of tuition at private colleges has more than doubled, while costs at public institutions have nearly tripled. Compounding the problem, tuition has grown ten times faster than a typical family's income, putting new pressure on families that are already strained and pricing far too many students out of college altogether. Yet, we have a student loan system where we're giving lenders billions of dollars in wasteful subsidies that could be used to make college more affordable for all Americans.
This trend -- a trend where a quality higher education slips out of reach for ordinary Americans -- threatens the dream of opportunity that is America's promise to all its citizens. It threatens to widen the gap between the haves and the have-nots. And it threatens to undercut America's competitiveness -- because America cannot lead in the 21st century unless we have the best educated, most competitive workforce in the world. And that's the kind of workforce -- and the kind of citizenry -- to which we should be committed.
And that's why we have taken and proposed a number of sweeping steps over our first few months in office -- steps that amount to the most significant efforts to open the doors of college to middle-class Americans since the GI Bill. Millions of working families are now eligible for a $2,500 annual tax credit that will help them pay the cost of tuition; a tax credit that will cover the full cost of tuition at most of the two-year community colleges that are some of the great and undervalued assets of our education system.
We're also bringing much needed reform to the Pell Grants that roughly 30 percent of students rely on to put themselves through college. Today's Pell Grants cover less than half as much tuition at a four-year public institution as they did a few decades ago. And that's why we are adding $500 to the grants for this academic year, and raising the maximum Pell Grant to $5,550 next year, easing the financial burden on students and families.
And we are also changing the way the value of a Pell Grant is determined. Today, that value is set by Congress on an annual basis, making it vulnerable to Washington politics. What we are doing is pegging Pell Grants to a fixed rate above inflation so that these grants don't cover less and less as families' costs go up and up. And this will help prevent a projected shortfall in Pell Grant funding in a few years that could rob many of our poorest students of their dream of attending college. It will help ensure that Pell Grants are a source of funding that students can count on each and every year.