Colleges Face Challenge of the Class Divide

Parents Forum
161

<p>"If you look at it using rate of return, and opportunity costs, you may come to a very different conclusion, but then that won't fit what you believe."</p>

<p>I doubt there are very many folks at prestige colleges who consider attendance in terms of "opportunity costs", since, TO THEM, this IS the prime opportunity. I also doubt that many full-payers would be willing to say to their kids - "don't go to Princeton, go to X (2nd tier state u) with the full-ride, and today I'll put the $180k into your investment account".</p>

<p>"There is a huge difference between those in the top 1% of the wealth in this country and those in the top 3%."</p>

<p>Remember that the bottom of the "top 3%" is the MINIMUM needed to be a full-freighter. The MEDIAN full-freighter is much higher than that (at my alma mater, it is well over a quarter of a million in income, and that isn't counting asset growth), and the AVERAGE full-freighter, much higher than that (again, not accounting for growth in assets). </p>

<p>"Some full payers do have to think twice."</p>

<p>And that's precisely why I favor much higher list prices. The full-payers who do have to think twice could be receiving greater subsidies and it wouldn't cost them a dime. But, from the perspective of the socialism of the rich, why subsidize the family with the $160k income when you could subsidize the multimillionaire?</p>

162

<p>"The millionaire who puts money into the endowment supports the kid of the next millionaire whom he has never met, reinforcing the class position of both."</p>

<p>That's awfully cynical. If the historically great colleges and universities are all they are cracked up to be, wouldn't one expect that their graduates may become quite successful financially? Isn't that what the schools are hoping when they make the cost affordable to the non-rich: that some of them will become successful and as a result benefit many other people, and perhaps, in gratitude, the school they attended? I wouldn't think a rags-to-riches story made possible by an elite college education would result in that person's philanthopy being motivated by preserving the class position of millionaires whom he has never met.</p>

163

<p>This subsidy thing is just garbage. I hope people don't believe this bs.</p>

<p>Why don't the schools raise their costs by another $80,000 a student and then only increase the tuition $75,000?</p>

<p>Wow. A $5,000 increase in the subsidy. I'm so excited. ;)</p>

<p>"I doubt there are very many folks at prestige colleges who consider attendance in terms of "opportunity costs", since, TO THEM, this IS the prime opportunity. I also doubt that many full-payers would be willing to say to their kids - "don't go to Princeton, go to X (2nd tier state u) with the full-ride, and today I'll put the $180k into your investment account".</p>

<p>That example is a little extreme. </p>

<p>I have offered my 2 kids money, or other opportunities, if they chose cheaper schools. I told them I would rather give them the money than give the money to the schools (to be honest, Princeton wasn't a choice :)). </p>

<p>The kids both chose the schools over the money.</p>

<p>Prestige is very important to the human psyche.</p>

164

<p>"Prestige is very important to the human psyche."</p>

<p>You bet. For "social opportunity cost-benefit", there's a lot more to be gained by putting money into the community college system than into any of these places. And from that perspective, most of these colleges are virtually irrelevant.</p>

<p>"I wouldn't think a rags-to-riches story made possible by an elite college education would result in that person's philanthopy being motivated by preserving the class position of millionaires whom he has never met."</p>

<p>Great! So why is it, then, that the colleges CHOOSE to preserve the class position of the millionaires over the potential rags-to-riches stories? You can cut the numbers anyway you like, but the percentage of students who get admitted and who attend in each category just don't lie. I don't think I'm being cynical at all - I'm just looking at the colleges' own data.</p>

<p>(And the answer as to why philanthropists would like it that way? That one is simple - these are "elite" institutions, and also their alma maters.)</p>

165

<p>"I have offered my 2 kids money, or other opportunities, if they chose cheaper schools. I told them I would rather give them the money than give the money to the schools (to be honest, Princeton wasn't a choice ). </p>

<p>The kids both chose the schools over the money.</p>

<p>Prestige is very important to the human psyche."</p>

<p>Few 18 year olds have a real grasp of the power of compounded returns and the vision to comprehend the advantages of having a major nest egg early in life.</p>

166

<p>"Few 18 year olds have a real grasp of the power of compounded returns and the vision to comprehend the advantages of having a major nest egg early in life."</p>

<p>They don't.</p>

<p>Many older people don't either.</p>

167

<p>"Wow. A $5,000 increase in the subsidy. I'm so excited."</p>

<p>With costs rising 6% a year, $20k in my pocket over four years seems okay to me. But then for folks paying full-freight, it is a drop in the bucket. ;)</p>

168

<p>"I don't think I'm being cynical at all"</p>

<p>What? You shifted the sins of the millionaires to the college and then claim you're not being cynical. Do you have a coherent argument or just a grudge against the establishment?</p>

169

<p>No. I just examine the data. My alma mater proudly TELLS ME (as does ID in talking about Swarthmore) that they are providing a $30k/year ($120k over four years) subsidy to the millionaires - whether I should believe them or not, I'll leave to Interesteddad and DStark to fight it out. They are also TELLING ME that more than half the students receive no financial aid (but are receiving the $30k subsidy), and that, of those receiving any financial assistance, about half come from families with incomes of $100k or above (top 20%). And relative to that, the aid for the potential rags-to-riches kids is a drop in the bucket (they'd get it if they get admitted of course, but there aren't that many of them admitted.)</p>

<p>And I have no problem with that. </p>

<p>I'm much more concerned with the students who can no longer afford the state universities.</p>

170

<p>Mini, do you have the tuition increases per year over the last 20 years?</p>

<p>When were the largest percentage increases?</p>

171

<p>Don't know. Somewhere on the Williams website are the tuition costs over the past 25 years (of course, tuition is only part of the story - Princeton this year went with no tuition increase, and a 19% increase in room and board.) Percentagewise, I'm pretty sure the biggest increases were in the mid-to-late 70s.</p>

172

<p>Mini, first of all the average FA at Amherst in the past year was over 26K. Tuition and fees came in at 69.2 mil whereas expenditure (minus FA) was 85.2 mil. If you subtract the G&A for financial aid and instructional cost for remedial course works, the balance will come out about even. that is, those who are paying full freight are indeed doing so.</p>

173

<p>
[quote]
...of those receiving any financial assistance, about half come from families with incomes of $100k or above (top 20%).

[/quote]
But mini, what you don't state is how MUCH those top 10% are getting. $1000, maybe $2000? Token reductions in tuition for the most part. Enough for bragging rights --- "Junior got $$ from both Williams & Princeton! We're so proud!"</p>

<p>If you have data that indicates the richest are getting decent financial aid, pleae share it. Nobody likes to pay retail, afterall. Colleges are clever enough to figure that out & list retail price along with the discount.</p>

174

<p>mini, I also believe the sharp increase in tuition is much more recent than the 70's. For states & privates. My 1976 tuition at NJIT/Rutgers was about $650. It's about ten grand today.</p>

175

<p>
[quote]
They could choose to charge closer to what the product costs, and then subsidize those who need it, and, as you well know, they choose not to.

[/quote]
</p>

<p>The market ultimately sets the price (both the sticker price and the net price).</p>

<p>I believe that Swarthmore specifically sets its sticker price by looking at a small group of close peers in the marketplace. Most of these close peers are all moving towards more progressivity in their pricing, which is why tuition and fees increase 5% a year like clockwork while financial aid discounts increase even faster.</p>

176

<p>This graph may help. Relative to inflation, college costs did not rise all that much in the 70s. The important thing to look at is the gap between inflation and college costs.</p>

<p><a href="http://www.collegesavings.com/nflation_chart.html%5B/url%5D"&gt;http://www.collegesavings.com/nflation_chart.html&lt;/a&gt;&lt;/p>

177

<p>
[quote]
Mini, do you have the tuition increases per year over the last 20 years?

[/quote]
</p>

<p>I can give you some inflation adjusted figures (in 2004 dollars) for Swarthmore:</p>

<p>Sticker price billed per student (in 2004 dollars)</p>

<p>1970: $16,794
2004: $37,716 (225% increase)</p>

<p>Financial aid discounts per student (in 2004 dollars):</p>

<p>1970: $2,659
2004: $10,659 (401% increase)</p>

<p>Net charges per student (in 2004 dollars):</p>

<p>1970: $14,135
2004: $27,057 (191% increase)</p>

<p>Per student expenditures, not inc. financial aid (in 2004 dollars):</p>

<p>1970: $29,252
2004: $68,304 (234% increase)</p>

<p>Basically, the school is selling a more expensive product for more money than it did 35 years ago. Not unlike the car market. 35 years ago, cars didn't have ABS braking, air bags, multivalve DOHC engines, etc. So, you not only pay the cost of inflation, but the cost of additional content.</p>

<p>For colleges, the content is added programs, vastly increased student support services, diversity, larger faculties, and so on and so forth. I didn't have a big screen HDTV in any of the student lounges when I was in college. I didn't have high speed internet in every room and wireless internet in every academic building. I didn't have computers available in every public space on campus with free printing. I didn't have options in Arabic, Japanese, or Chinese language instruction.</p>

178

<p>But you missed the most important number. Growth in income and assets of the top 3% of the population - the prime customers. </p>

<p>"Mini, first of all the average FA at Amherst in the past year was over 26K. Tuition and fees came in at 69.2 mil whereas expenditure (minus FA) was 85.2 mil. If you subtract the G&A for financial aid and instructional cost for remedial course works, the balance will come out about even. that is, those who are paying full freight are indeed doing so."</p>

<p>This one you should take up with Interesteddad, not with me. Note that while average FA at Amherst is over 26k (don't know whether that includes those receiving loans), more than half didn't get any. So the average discount rate is under $13k - on a $45k cost of attendance, it's awfully small. </p>

<p>"But mini, what you don't state is how MUCH those top 10% are getting. $1000, maybe $2000? Token reductions in tuition for the most part. Enough for bragging rights --- "Junior got $$ from both Williams & Princeton! We're so proud!"</p>

<p>If you have data that indicates the richest are getting decent financial aid, pleae share it. Nobody likes to pay retail, afterall. Colleges are clever enough to figure that out & list retail price along with the discount."</p>

<p>Oh, I agree with you completely! How wonderful it is for mom to be able say, "My kid is going to Princeton, with a scholarship!" It's worth much more than a big diamond. ;) And has more "panache" that the full ride to Emory or Vanderbilt.</p>

<p>The argument isn't that they are getting "financial aid", but that they are being "subsidized". If it's a discount from the cost of providing the product, it amounts to the same thing. </p>

<p>"I believe that Swarthmore specifically sets its sticker price by looking at a small group of close peers in the marketplace. Most of these close peers are all moving towards more progressivity in their pricing, which is why tuition and fees increase 5% a year like clockwork while financial aid discounts increase even faster."</p>

<p>The Prez of Williams has said flat out he is unhappy that they are providing subsidies to those who least need it. But to the extent that increases in tuition/room and board still trail increases in income/assets of the prime customers, he obviously hasn't convinced the trustees (many millionaires) of that.</p>

179

<p>"Mini, first of all the average FA at Amherst in the past year was over 26K. Tuition and fees came in at 69.2 mil whereas expenditure (minus FA) was 85.2 mil. If you subtract the G&A for financial aid and instructional cost for remedial course works, the balance will come out about even. that is, those who are paying full freight are indeed doing so."</p>

<p>This one you should take up with Interesteddad, not with me. </p>

<p>The argument isn't that they are getting "financial aid", but that they are being "subsidized". If it's a discount from the cost of providing the product, it amounts to the same thing. </p>

<p>The Prez of Williams has said flat out he is unhappy that they are providing subsidies to those who least need it. But to the extent that increases in tuition/room and board still trail increases in income/assets of the prime customers, he obviously hasn't convinced the trustees (many millionaires) of that."</p>

<p>Mini, if you don't want to argue about subsidies, fine, but you are using that argument, so, what's this crap about go argue with Interesteddad?</p>

<p>You're the one using the subsidy argument to sell your idea about the rich getting a bargain.</p>

<p>Mini, what do you think? An investment costs $10,000. You only have to put up $6,000. You will be gifted $4,000, but you have to invest to get the $4,000. Sounds good right. You get a $10,000 investment for $6,000. </p>

<p>Oh. There is a catch. After 20 years, your $10,000 investment is worth $10,000.</p>

<p>You still like the deal?</p>

<p>Mini, you have to look at the big picture, not just the subsidy.</p>

<p>I don't expect you to change your mind. :)</p>

180

<p>
[quote]
The Prez of Williams has said flat out he is unhappy that they are providing subsidies to those who least need it. But to the extent that increases in tuition/room and board still trail increases in income/assets of the prime customers, he obviously hasn't convinced the trustees (many millionaires) of that.

[/quote]
</p>

<p>I don't think that's the issue. For example, Swarthmore's Board of Managers has explicitly and publicly stated their intention to continue increasing the progressivity of their pricing model. I strongly suspect Williams' Board has taken the same position (based on articles some board members have published).</p>

<p>What the two boards are not convinced about is whether Williams or Swarthmore would be hurt competitively by announcing sticker price increases that are out of line with those of their close peers. I think that's an understandable hesitation. If Yale and Amherst are $45,000, what happens if Williams or Swarthmore announces a $55,000 sticker price? I believe both would suffer an immediate and signficant decrease in applications. As I say, the market sets the price.</p>

<p>BTW, Swarthmore does extend it's desire for progressivity in every area they can. For example, their study abroad policy is the most progressively priced system a college can employ. Wealthy full-fare students definitely subsidize lower income students in study abroad and that was explicitly stated as the reason for the change in policy.</p>

<p>Another example. All campus activities are free as a matter of policy, paid for from a student activity fee that is waived for low income students. Movies are free. Parties are free. 2300 Buffalo wings at a dorm Super Bowl watching party are free. There are no "dorm" or "freshman entryway" social fees. Again, the most progressive pricing policy available.</p>