Income Inequality and College Tuition

by Harry on September 15, 2013

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.



Eszter Hargittai 09.15.13 at 2:28 pm

Oh yes, this raises so many issues I’ve thought about for so long. Just one comment and a link on a related topic I’ve been meaning to post.

First, I agree with you that if only students realized the amount of potential financial aid available to them at certain schools, they would apply more broadly to institutions that otherwise seem completely out of reach financially speaking. Is it fair to say that knowing about these options is a type of cultural capital? I suspect college prof parents are well aware of this and thus can advise their kids accordingly. (Yes, children of many college profs would likely qualify for financial aid at all sorts of institutions.) But so many people have absolutely no idea. (Well, I don’t know of studies on this, but anecdotally I have encountered it numerous times.) So the question is: how do we get the word out about these financial aid options more broadly? I know some individual schools take this on to some extent, but some broader more systematic approach seems necessary.

Second, here is some commentary taking up similar issues that I’ve been meaning to share:


Foppe 09.15.13 at 2:32 pm

Question: would your advice have paid off if all of those students hadn’t been put off by the high sticker price, or would it then have become obvious that there isn’t enough money to subsidize all of their educations? Or would the system then have evolved differently to create the same outcomes (by finding a different deterrent that worked)?


chris 09.15.13 at 2:57 pm

Is a climbing wall really any more expensive than any other athletic facility? Or is it just a relatively new form of athletic activity that 50-year-old pundits know wasn’t in their gym when *they* went to college, so it must be a symptom of everything going to hell these days?


P O'Neill 09.15.13 at 3:01 pm

Another side of the equation is surely what the high price tag degree recipients are doing after college. One possibility is that the positional good is the needed credential for the positional jobs in finance, law, and consulting — dubious social benefit but high private benefits. This would suggest the need for more directed instruments than taxation and spending to reduce inequality, but measures specifically to reduce the attractiveness of these sectors (e.g. financial transactions tax).


b9n10nt 09.15.13 at 3:20 pm


Exactly right. Equality of outcome for adults (high marginal tax rates, strong financial regulation) begets equality of opportunity for the young (public investment in human and physical capital).


Bruce Wilder 09.15.13 at 3:24 pm

Sooner or later — probably later — we’re going to stop blathering about an abstract “inequality” and start talking about the parasitic nature of great financial wealth.

College education, which is a “positional good”, an adventure in “signaling” and gaining access to the elite career tracks, isn’t going to “moderate the expansion in income inequality over time.” Could we just stipulate that that bit of rote piety is a lie? Public institutions are not public anymore; the state legislature votes little in the way of subsidies for student education; they are vehicles for sinking a generation into debt peonage, while administrators and athletic coaches enrich themselves — a prime means for furthering the very parasitic inequality about which complaint is made.

Closing your eyes and wringing your hands doesn’t make you a good person and doesn’t generate insight or useful sentiment about “issues”.


david 09.15.13 at 3:27 pm


A climbing wall is cheap as facilities go – you can see some really, really cheap ones here:

It’s cheap because you just nail it to an existing gym wall, more or less.

For operating costs of sports facilities in general, if I had to guess, the heated swimming pool and the stadium would top the list.


Witt 09.15.13 at 3:31 pm

To the OP and Eszter in comment 1: I have been repeatedly struck by the damage that an ill-informed high school guidance counselor can do. In many of the poor and working-class American urban schools that I am familiar with, the guidance counselor is one small step farther up the social and economic ladder from the students — which is understandable.

What is less understandable is that counselors also have virtually no formal or informal professional development to help them develop the knowledge and social capital to serve students effectively. The latter to me is absolutely inexcusable.

It’s not just about finances, either (although ignorance about basic FAFSA issues surfaces over and over). It’s things like the counselor in a 70% African-American school whose reply to a student request was “What’s an HBCU?”*

*Historically Black College or University. Jargon, yes, but jargon that anyone who had been working for several years in a majority-black school should certainly know.


matt 09.15.13 at 3:47 pm

The info is hard to come by, but has there been a rapid increase in tuition at Vassar? I mean net tuition. Many “elite” colleges have seen flat or declining net tuition over the past decade. (For some reason, this is one of the best kept secrets in higher ed.)

Also, I think climbing walls are a red herring of sorts. A climbing wall indicates an institution’s lack of concern for learning, and so implies that they are in a sense “overpriced”, but a good college education, sans wall, is still going to be hella expensive, and will probably still increase in cost faster than inflation.


LFC 09.15.13 at 4:02 pm

This NewsHour segment refers to a report (done at Georgetown, no further specifics on authorship given) which has statistics on the income composition of student bodies at selective institutions. If the stats are right, they suggest, among other things, that info on availability of financial aid is indeed not being *effectively* disseminated (or being absorbed by quite a few potential applicants).


bianca steele 09.15.13 at 4:20 pm

Do these calculations take into account that “financial aid” might include loans at market rate, or that “ability to pay” might include home equity? I had friends, in a neighborhood at the low end of the middle class range, with younger siblings living at home, whose parents were advised to sell their house to pay the oldest child’s college costs. This was before the home equity craze; that’s not a solution, either.


Meredith 09.15.13 at 5:49 pm

Bianca, many and probably most elite schools like Vassar (and administrators like Cathy Hill, who is passionate about enrolling more low-income, first-generation-college students in these colleges) are very alert to the problem of student loan debt and try hard to minimize it. (Hence high tuitions, as Hill points out, as well as, e.g., development offices dispatched to raise scholarship money and greatly increased use of endowment income to support financial aid.) As for people in the middle getting socked (too wealthy to qualify for much if any aid, but not wealthy enough to pay except by taking out big loans), this group has always gotten socked in this way. But the middle used to have, in most states, the real alternative of quite affordable, good-to-excellent public colleges and universities. That’s what’s really changed. (See the link @1.) (Also, loan arrangements aren’t as favorable as they used to be for borrowers….)


Eszter Hargittai 09.15.13 at 5:52 pm

bianca steele – You raise an interesting point, a complicated one though. The following is not a comment on your friends, obviously, just using the example to raise some questions.

Let’s take a hypothetical that illustrates why these things get complicated quickly. Let’s take Family A, a family of four, two parents living with two kids. They have a 5-bedroom house. They are in considerable debt, because that house sure cost a lot and more than they could afford. Consequently they have little left to contribute to their child’s college costs. Let’s take a similar family of four, Family B, same configuration (living in the same neighborhood, similar income, similar needs), but they live in a 3-bedroom house and thereby have had enough to set aside for their children’s college costs. In that case, should it be on the college or the state to help out the child of Family A whose tuition the parents cannot afford, because they decided to live in a larger house than what made college savings possible? Or should it be Family A’s (the child’s or the parents’) responsibility to take out loans to pay for the costs (loans that may eventually require them to move to a smaller home)? If we go with the former and Family A child gets grants to defray the costs then that may make Family B feel pretty stupid about having bothered to save up for college if the alternative was a grant.*

Of course, the tricky part in all this is deciding what constitutes a reasonable expectation regarding the cost of a home and other expenditures. My understanding is that colleges run all sorts of models on things like this, but often do so in rather faulty ways.

By the way, another little-known component of the financial aid process is that if you are really set on a school, but cannot make it work with the package you were offered, you can go back to them and ask for more. The initial financial aid package that my alma mater offered me was a non-starter, but thanks to a friend who understood the system better than we did, we pushed back and got considerably more help. Based on that experience, I do know that the formulas that many colleges tend to use for expected contributions are extremely flawed. But it’s not clear that there are obvious formulas to implement given the multitude of variables to consider.

* Re grants, I realize that in many cases financial aid comes in the form of a loan, but some private schools often include considerable grants as well.


WEU 09.15.13 at 5:56 pm

An anecdata point: I was applying to colleges in the early 00s. My family is large (five children) and part of the precarious middle class (my father, the sole breadwinner at the time, was a multiply downsized middle manager.) I was explicitly forbidden from applying to high sticker price colleges. It worked out well for me eventually — after going to a flagship state school, I am getting a elite Ph.D. and have zero debt — but I am still left to wonder whether it was entirely a matter of cultural capital; whether my parents would have been unable to meet their expected contributions; or whether they were just unwilling to do so.

If the last, it would have been their right, and I would have no grudge whatsoever : no adult child should feel entitled to endless support from their parents, and if I were a parent, I would probably put some conditions of my own on tuition contributions. However, my experience was that I could not make an independent decision, despite being a nominal adult.

Relatedly, there was a recent N.Y. Times story about academically promising minority students (the profiled student was a young Mexican-American woman from Texas) who, due to family pressure, choose nearby, sub-flagship state colleges and underperform or even drop out (partially, again, family pressures.)

A second related story: I read a Quebec student protestor frame their struggle over tuition as whether it will still be possible for a student to work his or her way through. I’m not sure that’s still possible here. It was certainly much easier in the 50s and 60s.


adam.smith 09.15.13 at 5:57 pm

@2 – well, the top schools that offer good to great financial aid
a) would still get enough rich folks, who of course also tend to go to better high-schools, be they private or in suburbs with astronomical property prices.
b) are really, really rich. Northwestern – where my wife went not least because they gave her a better deal than UW Madison (in state) has an endowment in the 6billion range.

@bianca: FAFSA, which is most commonly used, doesn’t include home equity. (though CSS does) Generally, the wealthier the school, the more you’re likely to get as a grant rather than a loan. I believe Harvard guarantees people with family incomes under 100k (or so) to graduate debt free.

That said – why this is a great strategy for elite high school students – i.e. if you can make it into top tier private schools, you’ll likely get a better deal there than at a state school if you’re middle-class or below – if you’re not among the to 5-10% of college applicants, those prospects are a lot less rosy.


Jeremy Fox 09.15.13 at 6:06 pm

A little while back Felix Salmon discussed this issue, with a link to a useful chart showing, for hundreds of colleges and universities, endowment per student, the proportion of low-income students in the student body, and the net price low income students can expect to pay after financial aid is taken into account.


Harry 09.15.13 at 6:20 pm

Foppe – I find it hard to get a good answer to that question (which I press sometimes with people in these discussions). The reality is that genuinely poor children (the bottom 20%) who are qualified to go to elite schools are few and far between. Middle-income kids, it is different, and they are underrepresented, I don’t know how many the system could absorb. Somebody must have done an analysis.

chris — if that is a dig at me, I’m just reporting what gets said to me (directly, by the people who buy them). My college didn’t have a gym at all for what it is worth. Or a stadium. I’m sure Wisconsin’s new bowling alley cost way more than the new climbing wall next to it, and having somewhere to bowl where no-one has ever smoked is fantastic.


Eszter Hargittai 09.15.13 at 6:25 pm

adam.smith @15 – I’m pretty sure Princeton was the first to roll out the grants-only financial aid program in 2001.

Additionally, Princeton is one of few schools that offers need-blind admissions to international students, which is a huge issue itself (in my biased opinion since I was an intl student trying to get into a US college with a need for considerable financial aid). Since international students are not eligible for federal loans, college support in those cases is especially crucial.

Regarding getting into top schools, part of what is an incredible challenge for those coming from less privileged backgrounds is that they simply will not have had the opportunities to pad their resumes the way that the more privileged will have. I’ve interviewed applicants to Princeton in the past and was absolutely shocked by the kinds of experiences some of the applicants had. Not only would it require all sorts of connections to get some of them, but also considerable resources to make them viable (e.g., getting to Chicago from distant suburbs for various internships).


harry b 09.15.13 at 6:40 pm

Eszter — that’s true about the resume padding, but admissions offices can surely (and do, surely) take that into account when looking at applications, no? (the biggest cost an internship would have, and does, involve, for many of my students, is just the cost of not working for pay — but, again, this is all pretty transparent on an application).


nick s 09.15.13 at 6:42 pm

This is why the British government’s shock that pretty much every university chose the upper limit for tuition fees seemed disingenuous; I’m assuming all the PPE graduates in government (whether elected or Civil Service) know what a positional good is, and that Russell Group institutions consider themselves competitors with their American peers, and would love to have a headline tuition rate to match.


bianca steele 09.15.13 at 6:55 pm

At the low end, above the level you’d call poverty, we’re talking about the child of a union worker and a college-educated secretary or bookkeeper, or the child of a post-office employee, or the child of a single mother who fits the same description. People who fit that description can be found in every kind of school, from urban to suburban (even often in the wealthiest towns) to rural. We could also be talking about the child of two college-educated parents, one staying at home and the other earning between $80-100,000 a year–typically in the “better” schools with better resources and a higher “information level.”

I don’t think this adds to what the OP already said, so I’ll leave this there.


bianca steele 09.15.13 at 7:05 pm

FWIW a financial planner told me and Mr. Steele a few years ago that there was no point in saving for college (as opposed to funneling everything to retirement) because Harvard had committed to making tuition affordable for middle-income families, and he was sure everyone else would have followed within the next eighteen years.


LFC 09.15.13 at 7:20 pm

Eszter H. @13 — re your hypothetical — someone left a comment on the transcript I linked @ 10 who was very angry that he (father of a student) had been penalized by financial aid offices for saving while the family across the street lived high and then claimed no savings and got more help. Obvs this is anecdotal but it may go to your point about flawed models.


LFC 09.15.13 at 7:24 pm

“he was sure everyone else would have followed within the next eighteen years”

Probably going out on a limb there, wasn’t he? Esp. since he’s a financial planner and not, I presume, an expert on the economics etc of higher ed…


Satan Mayo 09.15.13 at 7:32 pm

A second related story: I read a Quebec student protestor frame their struggle over tuition as whether it will still be possible for a student to work his or her way through. I’m not sure that’s still possible here. It was certainly much easier in the 50s and 60s.

Oh, it’s definitely not. You can work full-time for four years to save enough money to then go to college for four years, if you can somehow find a job that pays that much without a college degree.


Barry 09.15.13 at 8:08 pm

nick s :
” This is why the British government’s shock that pretty much every university chose the upper limit for tuition fees seemed disingenuous;”

It was probably more that they ‘estimated’ that the universities would choose the lower ranges, so that the more likely, far higher rates wouldn’t be known ahead of time.


harry b 09.15.13 at 8:09 pm

LFC’s anecdote is commonplace. But it makes sense: colleges have no interest in rewarding the virtuous behaviour of parents. There’s a market at work, and if you have more money available it makes sense that you’ll get charged more. Said father could have got a better deal, though, by sending the kid to a less competitive college which would have wanted his kid more (and would have been more willing to discount).

Satan Mayo is also, basically, right. At least, it takes incredible energy. I know one kid who paid for the whole of college by working 40 hours a week, and all summer every summer, and got through (Madison) in 4 years. Her GPA suffered, but my god she got a good letter of rec from me (no better than she deserved).

But: if you are going to complete a four year college degree, it is still worth going into quite a lot of debt — the premium to graduating college versus just graduating high school has gone up. Its not worth going into debt for a philosophy PhD, of course.


Cranky Observer 09.15.13 at 9:08 pm

= = = LFC’s anecdote is commonplace. But it makes sense: colleges have no interest in rewarding the virtuous behaviour of parents. There’s a market at work, and if you have more money available it makes sense that you’ll get charged more. = = =

Which immediately raises the question of why the CSS, and even the FAFSA, aren’t violations of what little anti-trust law remains in the United States.



John Quiggin 09.15.13 at 9:35 pm

The failure of the top tiers of the system to expand enrolment makes almost any attempt at reform a zero sum game at this level. The really big problems for the US system are in the third and fourth tiers: non-flagship state universities and community colleges.

The fact that these aren’t even discussed in a thread like this is indicative of the failure of the system – hardly anyone who goes through these institutions ends up in the group from which CT readers and commenters are drawn.


Meredith 09.15.13 at 10:06 pm

What JQ just said. I don’t know that I’d use the word “failure,” since most of these schools cannot expand their enrollments and continue to provide the educational (I mean the truly educational) experiences they now provide. But, maybe because my husband teaches at a small state college and I live in a state (Massachusetts) that has continued to support and even expand its public higher education system more than most (see link@1), I see every day the positive results of focusing on the public rather than private. (Btw, more graduates of my husband’s state college than of my private one were killed in the WTC attacks, working at ultra-high-level jobs. Although my college sends many more students into graduate and professional schools than his, each college sends about the same number of students into primary and secondary school teaching. Just saying that we should be careful of stereotypes.)


Eszter Hargittai 09.16.13 at 1:10 am

harry b @ 19 – LFC’s comment @23 was in response to my comment @13 responding to bs’s @11, which brought up the issue of selling a house to pay for a child’s college costs. I guess I read too much into that comment though as I thought the advice had come from the college, but there is nothing in the comment to suggest that. However, colleges possibly suggesting that parents take out more loans to deal with other parts of their lives and expenses doesn’t seem that far-fetched. My point was that in the case of the hypothetical I present @13, that may not be a crazy perspective. (That ignores the more general challenges of college costs, of course.)


John Quiggin 09.16.13 at 1:35 am

As an aside, ANU had a climbing wall when I was a student there in the 70s (or maybe the 80s, I was there for a long time). I don’t recall any tour groups or even non-climbing gym-goers gawking at it, so maybe we are talking about something different.

I certainly benefited from having an indoor environment in which to discover that I was totally hopeless at climbing.


Omega Centauri 09.16.13 at 2:03 am

JQ, I think the real problem in the US is what I’d call the fifth tier, massive for profit univerities (you see adds for them on TV all the time), with mostly very relaxed academic standards. These have tuitions matched to the maximum student loan rates and will even help the students fill out the loan applications. I doubt many of these students are highly sought out after graduation.

The upscaling, I noticed the most was the food. Dorms used to come with essentially all you can eat caferterias -not great food, but adaquate and affordable. Now dorm students get cash credit at the food supplier, and every single item is overpriced. So the cost of feeding a student has clearly gone up much more than inflation.


bianca steele 09.16.13 at 2:20 am

Eszter, this was in 1983. It sounds like things have changed since then, and I’d say that’s a good thing. I guess I’ll have to wait thirteen years and see what the rules are like when they apply to me again.


LFC 09.16.13 at 2:44 am

Sorry if I contributed to things getting a bit tangled in terms of who was responding to whom. My point was simply that I had read a comment in another place from a parent who was *really angry* because he felt his virtuous behavior, in harry b’s phrase, had not been rewarded but the reverse. (I don’t know a lot of the details because the comment from the angry parent was more angry than enlightening.)

Harry B. @27 may be correct that colleges have no particular interest in rewarding saving by parents, but perhaps they should. One might think that that way they could direct more of their financial aid to those who actually have the most need. Indeed it seems likely that at least *some* financial aid offices (though evidently not the ones encountered by that angry parent) would have established expectations about how much they expect parents to have saved, based on annual income, assets, number of children, other circumstances, etc. But I’m just speculating here.

My own time as an undergrad was several decades ago, when tuitions everywhere were much lower. From this financial standpoint it’s only in retrospect that I see how relatively lucky I was in (a) going to college in the late ’70s as opposed to 20 or 30 yrs later, (b) not having to work while in college, (c) as an undergrad at least (this didn’t apply so much at the next stage) not having to worry about or concern myself at all with how I would pay for school. However, and perhaps paradoxically (or ironically, if that’s the better word), this retrospective recognition of how relatively privileged I was also makes me angry that I didn’t take fuller advantage of my four years at an elite university but rather, for various reasons, spent a fair amount of time being unhappy. I did learn something, but on balance I wish I could have done it all over later. But as that old beer ad proclaimed — arguably one of the high points (cough) of American advertising in the 20th century — you only go around once.


John Quiggin 09.16.13 at 3:23 am

@Omega Centauri The fifth tier, most obviously University of Phoenix is a big problem. But the regulatory arbitrage these places rely on is being gradually choked off. To the extent that they are anything other than frauds on the Pell grant system, the expansion of these places reflects the inadequacy of the (non-elite) public offerings.


John Quiggin 09.16.13 at 3:41 am

Repeating myself, I know, but I remain stunned by the fact that the top tiers of the US system have been nearly constant in student numbers since the 1950s (Ivies, Seven Sisters etc) or 1970s (state flagships).

Not only have existing institutions remained the same size, but there’s been almost no new entry (since 1970, I’m aware of George Mason and UC Merced, are there any others?) and not much, if any, upgrading of previously third-tier places.

That’s a dramatic contrast with most other developed countries, which have seen rapid growth of comparable institutions on all three margins (size of existing institutions, creation of new ones, promotions from lower tiers).


Eszter Hargittai 09.16.13 at 12:06 pm

That’s a very good point, JQ @37, pretty crazy. (Princeton, a few years ago, expanded its undergrad student body by about 10%. I realize that’s minimal and wouldn’t make much of a dent even if all Ivy+ schools did it, but thought I’d mention it.)

OC @33, indeed, that’s another area where lack of cultural capital makes a huge difference. People who don’t understand that there is a difference between one college degree and another take out insane loans, go into debt, and from what I know about the completion rates at such schools, often don’t even get a diploma in the end.

LFC @35, the point I was trying to make was in the opposite direction. While I appreciate that it may be hard to reward those who were careful and saved, I wouldn’t be shocked if colleges tried to penalize those who didn’t. But it’s not clear that they do. I did follow up on the discussion you linked to and that father is indeed irate, but in my opinion for pretty good reason (assuming he is actually reading his neighbor’s situation correctly).


harry b 09.16.13 at 12:39 pm

JQ — I can’t find it but a couple of years ago Mike McPherson and Sandy Baum had an oped in the Chronicle advocating that the top colleges double their enrollments. It was not a popular suggestion! Something to note is that since the 70s the talent pool for admissions at that level has expanded dramatically — first, women entered the mix, then rich people started spending way more on enrichment for their kids, and the appeal of teaching at elite public high schools rose relative to the appeal of other public high schools, etc.

But there have been upgrading. USC (where I went to grad school) is a good example — it is much harder for undergrads to get into than it was when I was there (a new President in the 90s transformed it in many ways). It’s not alone – though I hesitate to name others for fear of pissing off our readers who are vintage graduates of those places.


Harry 09.16.13 at 12:54 pm


Trader Joe 09.16.13 at 1:45 pm

Having recently been imersed in this topic it has been an eyeopener. The whole college aid topic is the only thing I’ve ever seen more complicated than commercial airfare and I think it definitely does reinforce income inequality despite its occasional best efforts to not do so. Gathering some points from upstrand:

There is an information asymmetry. At private high schools there is routinely one or more full time staff devoted to nothing other than helping students find grants, scholarships, aid packages etc. This is beyond the counselors who help suggest the where to go – this is the how to go as cheaply as possible. While some publc school systems may have this the ratios are no where near as good – its akin to having a travel agent for college selection. These resources are for students of on-balance wealthy parents many of whom could afford ‘full sticker price’ but likewise have the resources to investigate how they might not need to.

The loan system is a sham. While in theory loans are extended to all students equally its patently evident when parents compare notes that loan grants consider the parents ability to help repay the loan. A parent with an 800 credit score, it is apparently assumed, is not going to let their kid’s loan default even though they may not be legally obliged to pay it.

Children of such parents simply get bigger loans which then allow them to afford comparatively more expensive colleges or pay a greater portion of the “full sticker.” Its hard to tell if that helps the kid getting entry – many schools are seemingly pretty good at separating admission from financing, but it can’t hurt.

Its amusing to observe parents compare aid packages from the same school: Big U offered us A & B, ohh really, they only gave us C &D and then watch as the two sides work out their relative wealth and whether getting more aid is “good” or not in that context. The bottom line in either event is two rich kids will sit next to each other in class and both will have paid/will pay a different price for the same lecture.

Lastly (although there are dozens of other posts) children of rich parents are more attractive because they represent better potential donors – above and beyond whatever the tuition spend might be. Public or private universities want donations and see parents AND grand parents as a lucrative source of these. Where this fits in the admission calculus is hard to judge, but there’s no way its not in the equation.

Bottom line, while the admission/aid process may not mean to reinforce income inequality it surely does and it’s a complicated onion to unpeel given the complex ways both public and private universities are funded.


PGD 09.16.13 at 3:05 pm

As a matter of public policy, we need to deemphasize private non-profit universities in our higher education system. As JQ said above, these schools face overwhelming incentives to stay exclusive, and where not exclusive, expensive. They are institutionally incapable of being part of the solution to the mass inequality problem. Instead, we need to restore strong public subsidies to public education, and set up well thought out and healthy tiers in our public community college/university systems to serve different types of students.


jeff fisher 09.16.13 at 3:20 pm

Inequality has another powerful effect on college affordability.

Recall: if the income distribution today were the same as it was in 1970 median family income would be around $90,000 a year rather than around $50,000 a year.

An additional $40,000 a year in annual income for a very broad swath of the population would, all by itself, make current college tuition rates affordable for many of the families that struggle with them.

Still I would really like to see the finances of a small private college laid out to see where the $30,000 a year per student is going. Just two students pay the salary of a professor. If one thinks of classes as the prime service and professors as the direct providers of it the overhead is something like 7:1, which is pretty extreme. A lot of these places don’t even have fancy student perks.


Bloix 09.16.13 at 3:52 pm

I keep reading about these luxury dorms, but having put two children through highly selective and very expensive liberal arts colleges, and having seen their dorms and those of their friends at other institutions, I have yet to see anything that would rank as “luxury.” What I have seen are cramped spaces, two students to a room with perhaps 18 inches between the two beds (or single rooms the size of a walk-in closet), breeze-block construction, tiny windows, and poor sound-proofing.

It’s true that the quasi-prison levels of overcrowding at some universities has been relieved to some extent. You don’t see five students sharing a “three-room suite” that was clearly built in the 1920’s as two single bedrooms and a shared anteroom.

But “luxury dorms”? I haven’t seen them.

I suspect this is a trope that administrators use to blame the students for high tuition while deflecting attention from their own bloated compensation.


matt 09.16.13 at 3:57 pm

jeff fisher:

Vassar has a pretty detailed breakdown online. They say they spend 95 million on compensation– that counts faculty, administration, and staff. They don’t break down those categories, though they do say they have 1100 employees. They advertise an 8:1 faculty-student ratio, which would mean about 300 faculty. I figure 120K average faulty compensation (counting benefits); that leaves 60 million to spend on 800 administrators and staff. The average amount isn’t crazy, though the total number of non-teaching personnel may seem high– until you start thinking through all the positions you would need from groundskeepers to substance abuse counselors.

Here’s the thing: they get only 72 million a year from tuition and fees (2400 students * 30K average net tuition). And we haven’t counted physical plant costs and consumables. Donations, including endowment, keep the whole operation afloat, as is the case at every college.


Harry 09.16.13 at 4:10 pm

One thing to note about spending on administration is that, if you start to admit lower income children, whose parents do not know the world of elite higher ed like the back of their hands, and you feel some obligation to help them graduate, then you need to spend money on student services: counseling, advising, programs to create community for them, etc. Oh, and if you want to keep women from dropping out after they are raped you have to spent money on administration either upfront (to prevent rape) or after the fact (counseling, mental health provision, etc).

When people started paying attention to attrition rates of low-income and first generation students 20 years ago, administrative spending rose fast. You could just spend most of that money on faculty if you could get them to learn the necessary skills of course, then your spending on administration would look lower, but it would amount to the same thing. A fair amount of the rise in administrative spending has been because colleges have started taking their duties a bit more seriously. (A few years ago I accompanied a (first generation, low income) student who was about to drop out to an academic counseling session and watched that counselor solve the immediate problem in about 45 minutes, transforming that students’ prospects (soon to graduate with a Masters degree, will be a brilliant professional). Not cheap to do that. Worth it though).


mpowell 09.16.13 at 4:17 pm

Bloix@44: I imagine the cost of everything on a university campus is 1.5 to 2x the normal cost. This is the nature of a huge bureaucracy, especially one that is so shielded from actual costs. The cost is not always exposed to students, but now it is starting to be, in the form of higher tuition.


mpowell 09.16.13 at 4:21 pm

Harry @ 46: That’s an interesting point to note. It is convenient to assume that administrator growth has been all ‘bloat’. No doubt some of it has, as is unavoidable in larger institutions. But there really are some good underlying reasons for it.


SamChevre 09.16.13 at 4:33 pm

On administrator bloat–this Dean Dad post is interesting.

His summary–growth in administrators has been almost entirely in services to students with special needs, IT, and financial aid.


matt 09.16.13 at 4:49 pm

IT is big. Technological advances make next to nothing more efficient in higher ed, but only constitute costly new services. What was Vassar’s IT budget twenty years ago compared to now?

Looking at those numbers again: 60 million on 8oo staff members, considering that many of these are highly trained professionals, must mean that many other college employees are paid peanuts.


Harry 09.16.13 at 4:55 pm

Thanks for the link SamChevre, very helpful (and not just because it supports my point!)

matt: yes! Absolutely.


Meredith 09.16.13 at 5:41 pm

On administrative costs, see also Timothy Burke’s reflections (he gets to this subject after a bit):

One other cost I don’t think I have seen mentioned here: library services. Libraries, even with increased digitalization, are very expensive but central to a college or university’s mission.


lemmy caution 09.16.13 at 6:09 pm

Inequality drives up the price of goods that not everybody can have. Houses in a good school districts. Baseball and concert tickets. Colleges.


lemmy caution 09.16.13 at 6:12 pm

Baseball is a good example since you could point to new ballparks, fancy food concessions and rising player costs as the reason for the rise in ticket prices but the rise is really driven by the ability of the top 10% to spend all that money they get under inequality.


Bruce Wilder 09.16.13 at 6:39 pm

Inequality has effects, and a little collection of trivial observations of some of them, shouldn’t be allowed to obscure the larger truth that inequality is the product.

The entire system is deeply, deeply corrupt, and “designed” top-to-bottom — 1st tier to 5th tier — to produce “inequality”, not in the abstract, but by constant corrosion and abrasion. This comment thread is chock full of illustrations, from the debt peonage, which is the logical outcome of debt-financed education to cheating students in the cafeteria or at the bookstore (have you seen the price of textbooks?) or cheating most of the working faculty at many institutions of even a living wage. This is how “inequality” is produced — it’s not some mysterious, bank-shot side-effect of “technology” or “globalization”: it’s running the entire world like the pawn shop subsidiary of a crooked casino.


Martin Bento 09.16.13 at 6:54 pm

I went through this. The thought of going to a university whose tuition alone was more than my family made in a year was uncomfortable. I was told not to worry, I could get financial aid, but I didn’t quite believe it. Not that I wouldn’t get any aid, but that it would be sufficient to erase the sticker price difference with a state school. Another problem I had was reverse snobbery. I had some impression of Harvard and Yale as “snob schools”, which made them feel kind of icky, not a place I would feel at home (Reed appealed, but not enough for the price tag). I think this is a common problem with being low on the totem pole. Your condition becomes part of your identity, you and your peers develop provincial status standards in defiance of the prevailing ones, and you’re trapped in your condition because you have let it become part of who you are, and you cannot escape who you are. Adults I knew who were bright enough for college hadn’t gone, and their resentment became a sarcastic attitude.

In fact, the only people I knew who had been to college were my high school teachers, and they sounded still traumatized by the experience. They made it sound nightmarishly hard (they certainly didn’t convey how fun college is, which I think is more generally realized in the culture now than it was then). I realize now that they were just trying to clue us in that, in my fairly lousy high school, although we were in a nominally college-prep track, we were not really well-prepared for a good school, so we would have to quickly up our game. They also all came from state schools, I think, and had a bit of disdain for the private ones as overrated.


Erik 09.16.13 at 7:08 pm

@29/Quiggin: Yes, it’s pretty amazing. And the obvious result is that the difficulty of admission has skyrocketed. I’m pretty certain I would not get into Berkeley today with the application I did 17 years ago.

As an outsider, I’m surprised the campus movements at the UCs, that I am a little familiar with, don’t focus more on this. Even free tuition at the UC wouldn’t help the vast majority of California residents, because they couldn’t get admitted. And this is, of course, directly tied to their income level.


Harry 09.16.13 at 7:22 pm

Well, the campus movements are composed of people who are already there, who *would* benefit from free tuition and who would not benefit from having less advantaged students admitted now, or even in the future.


Meredith 09.16.13 at 8:07 pm

Harry, tell that to Mario Savio. Other forces are at work today, impeding college students’ from serious analysis of class issues and from becoming activist about them.


Erik 09.16.13 at 8:34 pm

Harry: Well, yes, but it would probably broaden the appeal of student movements if it did not seem from outside that the primary concern was an additional privilege for students. Students being, of course, a population that can expect higher lifetime earnings than average.


hix 09.16.13 at 8:56 pm

Average expenditure per student per year at German Universities of Applied science was 3970 € in 2010 and even that number does include some research expenditure that should not be something students have to pay for.

Research Universities spent twice as much per student per year despite much larger class sices. That can be explained by research spending, higher saleries and by their monopoly on expensive subjects like medicine or chemistry.

Harvard alone spends about as much as all those Universities of Applied science combined and the tuition fees still can only cover a small part of the budget. Luxury dorms and climbing walls cannot explain that. The most plausible answer is that those elite schools spend most money on reasearch and use education as a cash generator.


matt 09.17.13 at 12:05 pm


“The most plausible answer is that those elite schools spend most money on reasearch and use education as a cash generator.”

Doesn’t appear to be the case with Vassar.

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