Catherine Hill, President of Vassar, at the Washington Post explaining the rapid increase in tuition at elite colleges:
Increased access to higher education would help moderate the expansion in income inequality over time. Yet the increasing inequality itself presents obstacles to achieving this goal.
Real income growth that skews toward higher-income families creates challenges for higher education. The highest-income families are able and willing to pay the full sticker price. Schools compete for these students, supplying the services that they desire, which pushes up costs. Restraining tuition and spending in the face of this demand is difficult. These students will go to the schools that meet their demands.
Hence the proliferation of climbing walls and luxury dorms at selective and highly selective colleges (one college president told me that the climbing wall is a highlight of the college tour at both the private colleges he has led). Highly selective education is a positional good, and wealthy families have become enormously wealthier over the past 30 years and have been having fewer children: what are they going to do with all that money? Compete with each other to get their children into the best possible position, thus bidding up the price of highly elite colleges, making it unaffordable for others. In fact, elite colleges respond by using some of the revenues from those who cheerfully pay full price to subsidize students whose families cannot:
At the same time, many schools are committed to recruiting and educating a socioeconomically diverse student body. At private, nonprofit institutions, this commitment has been supported through financial aid policies.
Telling elite schools to keep down tuition doesn’t help:
Ironically, some of the proposed “solutions” to make higher-education finances sustainable would exacerbate future income inequality rather than address the trends that are creating financial challenges for institutions.
For example, in his 2012 State of the Union address, Obama called on colleges to slow down tuition increases and threatened to reduce public support. “If you can’t stop tuition from going up, the funding you get from taxpayers will go down,” he said. But slow tuition growth not tied to offsetting expenditure savings can result in reductions to financial aid. This is playing out in the private, nonprofit sector. Lower tuition combined with lower financial aid benefits higher-income students and hurts lower-income students.
Of course, public institutions, which are the main resort for lower income families, are different. They are the main resort partly because they have traditionally had a low-tuition, low-aid, model, and I cannot tell you how many students I have talked to who were deterred from applying to more selective private schools by the sticker price, applied only to Madison because it had low tuition, but who, I know, would be in much less debt than they are if they had applied to and attended the more selective, elite, private schools that they spurned because of the sticker price (which they would not have had to pay). Anyway, well worth reading the whole piece.