Thursday, January 24, 2008

Open Thread: Financial Aid

Last Tuesday an op-ed in the NYTimes argued:

Next year, each of these institutions will add more than $20 million to what they now spend on financial aid, reducing the cost of a college year for families earning $180,000 to $18,000, from $30,000. That’s good news for students at Harvard or Yale. But it’s bad news for many hoping to attend other private four-year colleges — and for the nation in general.

The problem is that most colleges will feel compelled to follow Harvard and Yale’s lead in price-discounting. Yet few have enough money to give more aid to relatively wealthy students without taking it away from relatively poor ones.

And today, the Wall Street Journal reported:

And on Tuesday, Dartmouth College announced that it would eliminate tuition for students from families with incomes less than $75,000.

Other colleges and universities say they are also pondering spending-rate increases. "I think all the major schools, including us, are thinking about it," said Scott Malpass, vice president and chief investment officer at the University of Notre Dame, whose endowment posted one of the biggest jumps in value last year, growing 35% to about $6 billion.

Some public universities say they will find it hard to match the latest aid offers from the elite schools. Scott Sudduth, assistant vice president and director of federal relations for the 200,000-student University of California system, noted that 75% of its $6.4 billion endowment is restricted for uses other than student aid. "For the vast majority of institutions -- particularly public institutions -- that's an ambitious goal that is out of reach," he said.

It's clear the new financial aid plan is a boon to Dartmouth students and the students of other elite schools with massive endowments, but will the changes harm higher education in general? Post your thoughts below.


Comma said...

"Yet few have enough money to give more aid to relatively wealthy students without taking it away from relatively poor ones."

So? Don't take it away from the poor ones! It's not as if all middle class students can go to Dartmouth for free now; Dartmouth/Ivy freshman class sizes are inelastic. If you're a second-tier college trying to compete, you don't need to match Dartmouth's offer, because the students you're going after won't get into Dartmouth anyway (the ones who do get into Dartmouth and are offered a free ride will take it, no matter what you offer). If you make a fair offer to the 80% of bright kids who didn't get into an Ivy League school for free, they'll come.

John Bruce said...

Remember that current college prices are the result of a runup above the annual rate of inflation since the 1970s, and much of this money has gone to non-teaching purposes. If there's competitive pressure, it will at some point have to take money out of these non-teaching line items. This is probably good. In fact, it's probably good that it may eventually require profs to spend more than the 9 hours a week they're currently required to spend on campus, 8 months a year (for $100K+).

The Wall Street Journal had an op-ed when Harvard made its tuition free that said the significant pressure was likely coming from Congress, since the taxpayer has subsidized the tuition raises all along via the loan program and Pell grants, as well as the tax-advantaged non-profits that endow the schools.

I suspect the real motive for the cuts must be along the line of OPEC not wishing to kill the goose that lays the golden egg.

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