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April 09, 2013 10:00 AM High-tuition, Not-High-Enough Financial Aid

By Daniel Luzer

A common line used by academic administrators and policymakers when colleges hike tuition is that there’s no real need to worry: scholarships will be available for the poor. That really high published price will apply only to the rich.

As former George Washington University President Stephen Joel Trachtenberg said of GW’s high tuition, “[Only] 40 percent of students pay list price. These are people from wealthy families; I have no compunction about charging them list price. They can afford it.” Iowa’s public institutions, taking this one step further, for years devoted part of their continual tuition increases to fund scholarships for low income students.

Does this really work though? Do scholarships for low-income students really offset tuition increases? At least for private colleges, not really. According to Education Sector:

On average, private, four-year colleges used $0.60 out of every dollar in higher tuition to increase institutional aid. Out of the 911 private, four-year colleges with sufficient data, only 29 increased their institutional aid by as much or more than they increased tuition. Another 502 colleges used at least half of the extra tuition revenue for aid. In other words, only 58 percent of colleges use at least half the extra revenue they bring in from raising tuition to increase aid. This is already a pretty pessimistic picture for advocates of the high-tuition, high-aid model.

And here’s a graph of how this works out.

HighTuitionHighAid

As Andrew Gillen explains, “colleges that increased aid by more than they increased tuition are in green, colleges that increased aid by at least half of the increase in tuition are in blue, and colleges that increased aid by less than half of tuition are in red.”

Because the image tracks the increase in the number of poor students, if colleges were really using high-tuition, high-aid the green dots would be clustered in the top left, the blue dots would be in the middle, and the red dots would be clustered in the lower right.

But apparently the average college spends only $0.60 of every extra dollar in tuition for need based aid. The other $0.40? That’s going to merit scholarships. In other words, rich kids.

In order to get a true picture of how this works out, of course, we’d have to look at public institutions (where the vast major of American colleges students are educated) too. But it doesn’t look very good.

In fact, “high-tuition, high-aid” is sort of deceptive. “High-tuition, not high enough aid” would be more accurate. If you’re a low-income student trying to attend college, after all, it doesn’t help you much if your institution characterizes your financial aid as “high”; it either does or does not make college affordable.

“This is” perhaps, “a pretty pessimistic picture for advocates of the high-tuition, high-aid model.” But then, it’s a little unclear if the point of high-tuition, high-aid model is really to give more poor students a college education.

In fact, if we were trying to design a financial aid policy to allow schools to charge more in tuition, attract more rich students, but appear as if they weren’t cutting poor students off, it would look a lot like this. And then we’d give it some Orwellian term like “high-tuition, high-aid,” to avoid criticism.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • Demosthenes on April 08, 2013 1:36 PM:

    Yet another excellent article on an issue near and dear to so many! I would like to offer a slightly different view. First, it is not known to many that private universities give out more money than most public schools (for the simple reason they generally have larger endowments). Thus, some private universities throw a lot of money at "rich" kids to attract academic excellence. Is that really a bad thing? If you are a university seeking to improve its academic reputation, the easist way to do so is to improve the "numbers" of its entering undergraduate classes. I have an example of what happened with my son, a high school senior. (I would note that we're not rich, but we can afford paying for college with some economizing). My son got "merit" money from two private schools: Northeastern and Tulane. Tulane was extraordinarily generous (half off). He didn't seek it, the schools just offered it. My son was a superior applicant (I know, I sound like a proud parent, but his "numbers" were well above average at both schools.) This encourages my son to go to these two schools, and crowds out comparable, but more stingy schools. Moreover -- and this is a crucial point -- merit scholarships do not foreclose a student getting financial aid. Thus, a bright kid needing money can get it, and private schools do give out financial aid. State schools just don't have the financial resources to match them. I would be most interested in any response. Am I living in a bubble?