Stop financial aid for wealthy students - responses to comments

I recently published an op-ed in Inside Higher Ed titled “Stop Financial Aid for Wealthy Students.” It generated a number of comments; in fact, it was the second most-commented article on the site for the week (second only to a news article titled “The Power of Race”) [Note: Currently the most commented in the past week on 11/10.]

Many posters were supportive of my views, but others were quite critical. Here are my responses to some of the criticisms people raised, along with a few other interesting posts. I have cut and pasted all or some of the comment, typos and all (you can go to the article to read the full comment), and then respond.

1. “Let's just remember that 120K doesn't get you the same lifestyle in New Jersey as it might in Texas before we call people at that level wealthy. Having lived in both places, and not being the extravagant type, I can tell you that $150K is the equivalent of a lot less elsewhere.”

“I realize that many family have a lot less, but with three paid jobs in the family (2 for me, 1 for my wife), we make about 150K. After mortgage, living expenses in NYS, state income taxes, medical bills, a private school tuition of 20K-30K or more would be the straw that breaks the camels back.”

“I disagree completely with Dr. Heller. I would like to know how a family with an income between $120,000 and $180,000 can pay to educate multiple children at $52K per year. Are we supposed to live on nothing? My family falls in this income range and I can assure you that we are certainly neither wealthy nor price insensitive; in fact, this group is the hardest hit by the exorbitant college tuition in this country. We don't qualify for need-based financial aid and cannot afford the pricetags of most private institutions.”

All three are correct that $150,000 or even $200,000 in income does not put you in the class of Bill Gates, i.e., someone who can purchase whatever they want without even thinking about it. Nevertheless, as I point out in the article, $200,000 does put you in the top 5% of all families across the country. Being among the top 5% or 10% of families in the country should not necessarily entitle you to the right to or privilege of having your child’s education at one of these elite institutions subsidized to the extent that that it is under current policies.

I’d love to be able to afford a Ferrari, but cannot given my income and other choices I have made. I have other good options that fulfill my transportation needs. Similarly, there are plenty of other postsecondary options for these families: lower cost institutions, borrowing to pay for a more expensive college, or as one poster noted, attending other institutions that offer merit scholarships. One commenter included the cost of private school tuition; this is clearly a choice that family made, and if it leaves them with less money for college, then they have to live with that decision.

One person summarized these arguments very cogently: “I do agree that $150K in Austin is not the same as $150 in New York City, but for those of you complaining that parents with a $120K+ income deserve to have this children qualify for financial aid because of the $52K/yr price tag, remember just one thing: one can get a good college education without going to Harvard, Yale, or Stanford. Why not go the University of Virginia or the University of Michigan at approximately half the cost? Or, if the network and cache of the Ivies are that important to you, take out student loans. Subsidies for the middle class and/or wealthy are unconscionable in this economy. Harvard is going to fire librarians, but give $34K in aid per year to a kid with a family income of $150K?”

And yes, the cost of living differs in different parts of the country. Living in a rural area, I am fully aware that the cost of living here differs from that of the metropolitan New York area. But if some of these posters want to complain about the difficulty of living on $150K in New York, I would like to see them try to live in the Boston area on the $30,000 a year a janitor at Harvard may make. Or as one person said, “So private institutions are giving grants to the wealthy, but laying off staff. One wonders what the salaries of the layed off staff were? Can you look a janitor who makes $24 K in the face and say that I have to terminate you because I need your salary to give a wealthy kid a grant?”

2. “As a parent of a Yale freshman, and a single parent with an income in the 60-12K range, I am very grateful for the aid afforded to us. Had Yale not had such a generous aid policy, my son would not have been able to attend. It's high time that these students' achievements be rewarded, no matter what the family income. I work in a college where most of the students are from low income backgrounds, and, unlike the atmosphere at Yale, the attitude most of the time is that of entitlement, not hard work and earning your keep.” [emphasis added]

I would love to know at what college this parent works – or more appropriately, on which planet he or she lives? Based on my experience, and that of many of my other faculty colleagues around the country with whom I speak, it is the students from wealthier families at the elite institutions who are the ones who arrive with and maintain a much greater sense of entitlement, not the low-income students.

3. “My step-daughter attends a small, respected regional liberal arts college and has reached the maximum amount of loans and grants permissible by the federal and state government. She received a large college scholarship and received an outside scholarship because her father survives on worker's compensation. And yet, despite a family income below $30,000, there is an outstanding bill of $3,000 per semester.”

This commenter is absolutely correct – the data on financial aid show very clearly that students from lower-income families generally face much higher levels of unmet need than those from middle- and upper-income families.

4. “I have known undergrads whose parents continued to claim them as tax deductions while providing no actual support, which kept the student from being able to receive financial aid. There should be a way around this.”

This comment was in response to an early person who said her parents did not provide any support when she went to college. There is in fact a “way around this” – it is called professional judgment, which financial aid officers can apply based on an individuals’ circumstances. If the person can in fact document that this has occurred, they can be treated differently.

5. “The ‘financial aid’ provided by these wealthy institutions is NOT financial aid. It is tuition discounting and it's all about marketing and retention. . . Raise the institutional profile etc.”

This may be true for some institutions, but certainly not Harvard, Yale, and the like. How much higher can their profiles be raised?

6. “These schools are privately run enterprises and how they see fit to run their college is their business. If they were public, the article and discussion would be appropriate. However, they are private so they only have to report to their benefactors and boards, not the public, students, faculty, researchers, staff, etc.”

I respectfully disagree (as does Senator Charles Grassley, I am sure). These private institutions benefit from huge public subsidies in the form of 100% income tax deductions for charitable gifts made to them, exemptions from almost all federal, state, and local taxes, and federal (and in most cases, state) support for research and student aid. Thus, I argue that they do have an accountability to the public good.

7. “If a child of a multi-billionaire applies and is admitted to Penn State, Dr. Heller's institution, doesn't that child receive a large discount off the cost of tuition based on something as silly as his state residence? What if Bill Gate's daughters apply to the University of Washington?”

In the ideal world, I would agree with this comment. In that world, we would increase tuition at public universities in order to capture the large consumer surplus that wealthy students enjoy through the subsidized tuition, and then use the increased tuition revenue to provide more need-based aid to poorer students. Unfortunately, much research shows that these poorer students tend to respond to the sticker price of college, rather than the net price, because of imperfect access to information about financial aid. Thus, if you moved toward what economists refer to as a “high tuition, high aid” student financing model, you run the risk of pricing out many needier students.

8. “Nice to know that as I look at my bank account, which has $30 in it with payday 10 days away, that our combined income of $150K makes us ‘wealthy’. Taxes (state, federal, local, and Medicare/Medicaid) eat up almost 40% of our gross income. We *always* have to pay on April 15th, despite having the maximum withholding.”

This person may not feel wealthy, but I return to what I said earlier: An income of $150,000 per year puts you in the top one-tenth of all families in the country, an income higher than 90% of all others in the nation. I recognize that each family’s circumstances differ, but I still find it difficult to accept a policy that automatically gives a huge subsidy to every student at this income level, without any means-testing at all. [Note: the author of this post commented here on my blog (as "DrMom") and I replied]

9. “So students' parents should be expected to pay half of their family income? After taxes, expenses, it just isn't possible!”

Once again, it should be up to families to decide whether or not to make the sacrifices necessary to pay for one of these elite institutions. Current income is not the only source available to pay for college; families and students can also choose to use savings, other assets, or borrowing. And most of these wealthy families have much higher levels of assets and access to credit than do poorer families.

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Well, that’s it for now. Once again, I hope you will go back and read the entire article, along with all the comments. And please feel free to comment here also.