If you are a parent chilled by accounts of the soaring costs of higher education, particularly at the nation's private colleges and universities, there is both good news and bad.
The pleasant first: most students do not pay the posted price. Instead they receive subsidies and discounts from various sources—Uncle Sam, the state, the institution itself, the Rotary Club—that enable them to matriculate for a significantly lower cost than media tuition alerts would lead you to believe. Fifty-five percent of full-time undergraduates in 1986 received one or more forms of student aid. Moreover, the average assistance package was sufficient to offset 44 percent of their educational expenses. Crudely stated, more than half the students (and their families) get by with paying barely half the posted price.
Now the glum part: if you are in the minority that gets no discount, you are helping to underwrite bargains received by other people's children. Of course you already did this once as a taxpayer. Of $21 billion in student aid awarded in 1985-6, $16.2 billion came from Washington (including the value of government-backed loans) and $1.4 billion from state programs. But $3.4 billion also came from "institutional resources," which for the most part means revenue derived from tuition payments.
Approximately one-sixth of the average assistance package received by the average aided undergraduate in 1986 was drawn from the college's own resources rather than from externally funded programs. On private campuses, the major form of income is student tuitions and fees—and these schools account for almost two-thirds of institutionally funded student grants.
The extent of this income redistribution via college pricing policies becomes clearer if you look at some examples. At costly Princeton (comprehensive fee now $15,980), thirty-seven percent of last year's freshmen received student aid packages (from all sources) averaging $10,050 in value. At the University of Rochester (posted price $14,924), fifty-seven percent of last year's freshmen were aided in amounts averaging $9,552.
Much the same pattern persists on less celebrated campuses, sometimes more so. At Pepperdine, where the comprehensive charge is $14,383, half of last year's freshmen received aid packages averaging $6,180. At DePaul, which costs $8,462 for those who pay full freight, seventy percent of last year's freshmen paid less than that; their aid packages averaged $4,302. Mercer charges $7,977, but last year seventy percent of its freshmen forked over lesser amounts; their average aid package was $5,613. At Trevecca Nazarene College, which charges "only" $6,153, nine out of ten of last year's freshmen received aid in amounts averaging $5,025.
To be sure, much of the aid package comes from government-sponsored programs, and not all of it is outright subsidy. At Trevecca Nazarene, the self-help component (loans to be repaid, student jobs, etc.) constitutes three-fifths of the total, although self-help accounts for just one-third of the total at Pepperdine and only 28 percent at Rochester.
But remember, too, that student assistance does not cease with the freshman year. At the University of Southern California last year, one quarter of all undergraduates had college-administered need-based scholarships averaging $3,100 in value. At Princeton, 42 percent of the undergraduates received such grants in amounts averaging a whopping $7,280 each.
If all the income-transfers were going from wealthy students to impoverished classmates, one could detect a clear principle at work. But the American Council on Education reports that (in 1984) only 42 percent of institutionally funded student aid was awarded solely on the basis of financial need. The rest was handed out on grounds ranging from academic merit to athletic prowess.
Some of this aid is used for discounts meant to tempt prospective students who might otherwise go elsewhere. On the vast majority of American campuses, keeping the classrooms full is now the primary task of the admissions-and-financial-assistance staff. Only a handful of institutions—fewer than fifty, estimates education writer Ernest Boyer—turn away more applicants than they accept. Many state colleges and universities admit essentially everyone. And most private campuses are now so hungry for students that they too allow practically anybody to enter the gates. Here are some acceptance rates for students applying to enter as freshmen in the fall of 1985: Oberlin 59%; Denison 65%; Kalamazoo 80%; Baylor 89%; Marquette 78%; Rochester 75%; Pepperdine 57%.
What is more, most private colleges crave students ardently enough to discount the price to some who could pay full freight. Though Congress has so relaxed "need" standards that half of all undergraduates on private campuses now receive federal student assistance, "no-need scholarships" are also spreading. The National Institute of Independent Colleges and Universities reports that overt no-need aid more than doubled in value on private campuses between 1982 and 1984 and that, when combined with fellowships, waivers, employee discounts and such like, the total almost equalled the value of means-tested aid.
The less prestigious the private college, the more difficulty it may have filling its freshman class without such inducements. Rochester awarded only 172 non-need scholarships to its 4,555 undergraduates last year; but Bethel College distributed 900 such subsidies to its 1,791 students. Pepperdine conferred 739 (more than the number of need-based awards it gave); DePaul 459 (with an average value greater than its need-based grants); and the University of Southern California 1,190.
Yet the biggest no-need subsidies of all are not found in the private sector. These, of course, are state appropriations for public colleges and universities, subsidies that enable them to charge deeply discounted tuitions to all who attend them, without regard to wealth or poverty.
Still, public higher education also distributes vast quantities of student aid. Ninety percent of last year's freshmen at Ohio State applied for assistance and two-thirds of these received it. So did 57 percent of the entering class at Frostburg State and 46 percent at East Tennessee State. This, remember, is in addition to the huge built-in discounts for everybody such that state schools charge an average tuition (not including room and board) this year of $1,337, compared to $5,793 in the private sector.
These across-the-board subsidies, while perhaps unjustified on progressive principles, are at least clearcut. Go through the looking glass into the private sector, however, and you are back in a world of higher education financing where things are rarely what they seem. Where the posted price keeps rising—much more rapidly than inflation in recent years—but where the proportion of people who actually pay it is already a minority and still dwindling. Where an odd blend of liberal doctrine and institutional self-interest (always described in terms of the former) dictates that if you pay full freight some portion of your payment will go for other people's educations— some of them because of financial need, some because the college wants their bodies in its classrooms (and their partial tuition payments in its coffers), some because they are good ball players, some because they're bright.
Half concealed here are the remnants of an honorable tradition: consciously diversifying the student body on a campus, and making its educational resources available to those too poor to purchase them directly. But that is precisely the reasoning that justifies billions in basic state subsidies and billions more in taxpayer-supported student financial aid via Washington and the state capital. There may be a case for the full tuition-payer also to be taxed again, this time by the college itself, to help finance other people's educations. But when a portion of that resource transfer goes to benefit students who do not qualify for it on grounds of poverty, you have to wonder. The next time you read that college tuitions are escalating another ten or twelve percent, or contemplate paying the full "posted-price" for your daughter or son's Ivy League baccalaureate (which will cost you not less than $64,000 if your youngster matriculated this past autumn), pause and ask yourself whom else you're subsidizing and through how many different mechanisms. And whether you really need to remain in the full-price minority. Remember: Robin Hood is not dead. He's in charge of higher education finance—and he isn't always sober.
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