Do colleges take from the poor and give to the rich?

Celia Baker's article, "How colleges take from the poor, give to the rich," in the 24 May 13 issue of the Deseret News is a perfect example of what can happen when a journalist meets a think tank report.  The report's assumptions go unexamined, its examples become universals, and its conclusions become truth.

The report in question is the New America Foundation's Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind, which makes the unexceptional observation that the purchasing power of a Pell Grant has been in long decline because its value has become stagnant, state aid for higher ed has shrunken, and tuition at all sorts of colleges has been on the rise. The report's goal is to propose policies that will make it possible for more low-income students to go to college. Again, unexceptional, and, with changes in the demographics of college-going, necessary. But Undermining Pell makes additional arguments that require more scrutiny. Baker does not provide that scrutiny.

Take, for example, the article's title, which mimics the subtitle of NAF's report.  Do colleges take from the poor and give to the rich by means of what the NAF calls a "an elaborate shell game" wherein an institution reduces aid available to poor students because of their Pell grants, and re-directs that aid to "wealthy" students?  No.  Instead, institutions offer need-based aid and merit-based aid (academic scholarships) that stack on top of other aid (federal, state, outside scholarships, savings) to reduce the amount of money a student pays out of pocket.

Take this example.  Two students with the same academic background are accepted to the same college.  One qualifies for a full Pell Grant, the other does not qualify for any Pell aid.  How do their financial aid packages compare?

Student one gets $5500 in Pell aid, $3000 (for example, institutions set their own need-based aid policies) in need-based aid, and $15000 in merit aid, for a total scholarship package of $23,500.  Student two gets $15000 in merit aid  and $2000 (for instance) in need-based aid.  For which student does college cost less? Student one.

But Baker and NAF would argue that the situation described above is a perfect example of the problem, in that the amount of merit aid dwarfs the amount of need-based aid.  They would argue further that poor students should get more aid than "wealthy" students, because those "wealthy" students have greater means to pay for college.  But is student 2 "wealthy"?  Almost certainly not.  As the report notes, Pell funds are not available to students whose family income tops $50,000 a year.  The determination is made by means of the Expected Family Contribution (EFC) component of the FAFSA.  EFC is a notoriously complex estimate of how much a family can contribute annually to a student's college costs.  Suffice it to say that very few families are actually able to pay as much out of pocket as the government suggests they can.

So is there a shell game going on, where Pell funds are taken from the poor and given to the rich? Or, as Baker puts it: "Like a carnival conman duping an earnest mark, colleges are using Pell grants to take the place of institutional aid they would have given to needy students, then shifting those funds toward recruiting wealthy ones through "merit aid"?

 Only if by "take from the poor and give to the rich" you mean "using Pell funds and other income to pay for educating students."  Otherwise, no.  In fact, as I have argued before, if there is a subsidy it flows from students with weaker academic backgrounds (who thus receive less or no merit aid and must pay more out of pocket) to students with stronger academic backgrounds.  At my institution, the proportion of students with need has increased, not declined over the past several years.  This is due to families being willing to borrow a bit more for the indisputable benefit of a college degree, to subsidies that flow to all undergraduate students from donors, graduate student tuition, etc., and  to my institution's willingness to increase the amount of aid available to students.

 It is simply wrong to suggest that merit aid reduces aid to low-income students, unless those students are so academically weak that they do not qualify for any merit aid.  Otherwise, merit aid serves them well, and coupled with need-based and federal aid, reduces their cost of going to college. Further, merit aid provides a baseline predictability to a student.  If a family's financial situation improves, the amount of need-based aid might decline.  But merit aid stays steady.  So for a family budgeting for four years of college, merit aid is a key component of their financial aid approach.

I could go on at length about other assumptions and assertions in the article and report.  But let me address one more directly.  After complaining that colleges unfairly treat low income students be means of their institutional aid policies (preferring merit aid over need aid) Baker reports a contradictory assertion from the NAF report.  They suggest that institutions actually try not to enroll low-income students, taking a "passive-aggressive approach" to low-income students called "gapping" wherein they "offer needy students aid packages much too small to meet their needs, deliberately underfunding them to discourage enrollment." (The quotes are Baker's.)

Two responses.  One, yes, colleges charge more for tuition than they give back in aid.  No institution, even the wealthiest ones with massive endowments or those in states that still provide strong subsidies, can stay open if students do not pay tuition.  Eliminating "gapping" is the same as not bringing in revenue.  And as I have shown above, the wealthier the student, and the weaker (academically) the student, the bigger the "gap" between institutional aid and total cost of attendance.

Two, no enrollment professional I know of would go to all of the work and cost of recruiting a student, evaluating that student's application, and creating a financial aid package in order todeliberately not enroll a student.  We don't have the time, or the resources.  But more importantly and contrary to the article's assertion, we want low-income students to go to college.  And we believe that they will flourish at our institutions.

Baker and NAF have the luxury of calling for a world where low-income students can go to any college they want for free due to the largesse of the federal and state governments and the generosity of the institution.  We do not live in that world.  So my job, and the jobs of my staff, is to do something much more difficult: enroll a diverse class of students who will learn, flourish, grow, graduate, and succeed after graduation, while at the same time bringing in enough tuition dollars to ensure that the education those students need is, in fact, available to them.