Conference back40::soapbox

857.0. "The Cost of Higher Education" by WAHOO::LEVESQUE (Spott Itj) Tue May 06 1997 12:00

    The real cost of financial aid: Needs-blind admission isn't the answer
    for colleges
    
    By Carolyn Shaw Bell, 05/06/97 
    
    The recent student demonstrations at Mount Holyoke included a demand
    that the college return to needs-blind admission. This means applicants
    are considered on their merits, without looking to see whether they can
    pay the price. That price consists of tuition, room and board, books
    and supplies, and travel to and from home during vacation times. If
    needs-blind admission is guaranteed, then the college promises the
    student will have financial aid to meet the price. Such a promise has
    costs. 
    
    Although the costs can be measured in dollars, they consist of more
    than money. If Mount Holyoke, or Amherst, or Boston University, or
    Northeastern gives a financially needy student tuition assistance of
    $5,000, that does not mean the school has to find an extra $5,000. No
    out-of-pocket expenses will increase by admitting such a student. She
    can join classes, study in the library, log on to the computer, and
    look through microscope or telescope without requiring the college to
    add faculty, staff, or equipment. 
    
    The real cost of providing financial assistance lies in giving up the
    potential $5,000 that might have been received had another student,
    paying full tuition, been admitted. If 100 percent of the first-year
    class pays full tuition, the college has more funds than if it grants
    scholarships or other discounts on tuition to even one student. But
    this is true only if enough students with the financial means to pay
    the full tuition have applied to the college, and they're academically
    qualified. 
    
    Such may or may not be the case. In the face of declining enrollments,
    the college may be better off admitting some students at less than full
    price (discounting by means of financial aid) than not, as long as
    these students provide some additional funds. This is the same
    reasoning as in airline discounts: If the plane is flying anyway, more
    passengers at less than full price increase total revenues. In the case
    of rising enrollments, the college would be better off admitting those
    who can pay full price first, and reserving unfilled places for
    financial aid students. Such a system would be the reverse of
    needs-blind admission. 
    
    But, of course, millions of dollars already go to all students on a
    needs-blind admission policy. Public colleges and universities keep
    tuition well below the actual education costs, because of a misguided
    notion that this helps lower-income students. Of course, the difference
    - ranging from 95 percent to 60 percent - must be funded by taxpayers,
    many of whom have lower incomes than those of the students and their
    families. And private colleges extend financial aid to all students
    when the total costs of the students' educations exceed the amount
    paid. For most private colleges, tuition falls below total costs by
    anything from 15 percent to 50 percent: Income from the endowment, plus
    current gifts, make up the difference. 
    
    Neither subsidy is well understood. The funds provided all students at
    public and private universities and colleges of course constitute
    guaranteed needs-blind admission. It differs from financial aid in what
    happens after admission. For the tuition-paying entrant, the college
    price is known: full tuition is $2,400, $7,500, $12,000, or whatever.
    The total cost of the education will be irrelevant to the student's
    payment. For the financial aid entrant, the price will be negotiated by
    the financial aid office and the applicant. The actual sum must be
    determined after considering the financial need of the applicant. 
    
    Such financial need is not scrutinized for the rest, who pay less than
    total costs and receive a subsidy just as much as the ``scholarship
    students'' or those receiving financial aid. Why is the second group
    discriminated against by having to provide financial information and
    meet other conditions not set for the rest of the student body? 
    
    It's probably because the subsidization of education looms so much
    larger at public universities and colleges. There, the difference
    between what students pay and what college costs is greater than in the
    private sector. Since the University of Massachusetts has a very small
    endowment, the needed funds come from taxpayers. This redistribution of
    income, from poor to rich, has existed for generations and is
    well-documented. Why taxpayers allow it to exist joins that second
    question above about discrimination. 
    
    The solution in both cases is the same. All students should be charged
    the full cost of their education: Tuition should equal 100 percent of
    the cost. Then all students can be provided with financial aid
    depending on their need. Private colleges will find their endowments
    can provide much more financial aid than they now do, or at least vote
    on how much they want to pay. 
    
    If setting prices at 100 percent of cost is unthinkable, increasing
    tuition everywhere will help. If college is better off if all students
    pay full tuition, so it is better off raising the price if only one
    student can pay the full amount and financial aid must be given to the
    rest. 
    
    The economic solution to this question is so clear, so obvious, that it
    remains one of the most puzzling features of the US economy. Along with
    the misguided notion that people over 65 must be subsidized for their
    medical care, for their travel or groceries or local taxes, the idea
    that getting an education makes people eligible for financial aid has
    been wholeheartedly adopted. 
    
    Carolyn Shaw Bell is the Katharine Coman emerita professor of economics
    at Wellesley College. Her e-mail address is [email protected]. 
    
    This story ran on page c4 of the Boston Globe on 05/06/97. 

    
    I don't see anything wrong to enjoy lower tuition in state
    university.  Because I pay tax every year.  The same as we
    go to library for free.