The Tuition Debate

Parents Forum
421

<p>@skylvr, you seem to like to like to put a lot of words in my mouth. </p>

<p>I never disparaged Bowdoin students. I specifically said I had a hard time justifying paying full freight for it because of the ROI. If Bowdoin gave merit scholarships, I’d be willing to look at it, just like all the students who are eligible for FA do, bcs it would have a better ROI, since the “i” in the denominator would be smaller.</p>

<p>I never advocated getting rid of Pell grants, but simply pointed out that high tax payers are disproportionately funding them. </p>

<p>

I never expected, demanded, or even asked for free. But I have repeatedly stated it would be less BS if colleges simply leveled out their prices and reserved FA for the poorest of the poor. What we have now is a circus of people trying to figure how best to “hide” their assets to maximize FA.</p>

<p>You, on the other hand, in your quest for “social justice” are determined to stick to higher income people no matter what. </p>

422

<p>High tax payers are not disproportionately funding Pell grants-- the more taxes you pay, the smaller the share of your taxes go towards the federal education budget (i.e. your use of the word “disproportionate”). In fact, the folks who are disproportionately funding Pell grants are the folks who are just over the line for the earned income credit- i.e. middle class and moderate income folks. </p>

423

<p>

</p>

<p>In both relative terms and absolute terms, the taxpayer in the 39.6% bracket is contributing more towards the federal education budget than the taxpayer in the 15% bracket.</p>

424

<p>@GMTplus7 then why the ‘find himself’ quip here

</p>

<p>You could have made the same point without the quip.</p>

<p>But who, for you, are the ‘poorest of the poor’? You do realize that about 55K is the median income in this country. If these colleges do as you suggest, what would the overall price be? Could a median income or low income family still have access to these schools? I won’t figure this out for you. I have done enough on this thread to point out other ways to think about these problems.</p>

<p>With respect to hiding assets–as with any program, there will be groups of cheaters. How prevalent is this practice? That doesn’t mean the program or service should be abandoned. I have students who hand in plagiarized papers. It doesn’t mean I should stop teaching the course altogether.</p>

<p>With respect to ‘sticking it’ to higher income people–higher income people are not forced to attend these elite schools. They could just as well go to cheaper schools. It’s voluntary to attend elite schools. So what’s your beef? You think your kid could get an equivalent education as a state flagship. Fine.</p>

<p>In addition, as I said, there is an ethical tradition here that those with more resources should help those with less. </p>

<p>With respect to social justice, I do think that capable students should have access, and it shouldn’t depend on income. Alabama has a 20 ACT requirement to be admitted. That’s the average ACT for the state. What if you have that requirement and make 55K? How can you afford the 20K sticker price for an in-state student?</p>

<p>Maybe you think that 20 ACT is too low…but that’s another conversation…</p>

425

<p>@Benley:</p>

<p>That’s why I would recommend a school that is well-respected overall (at least in your career/field of interest) as well.</p>

<p>Personally, if I want a LAC experience and had the accomplishments to get in to a top LAC, I’d look at LACs that offer a decent amount of merit aid (there are actually a good number of them) or New College of Florida. If you go to a LAC, outside of maybe the top 10-20, most people won’t have much of a clue about your LAC anyway, so what’s the difference between #20 and #60?</p>

426

<p>

By your own reasoning, so could poorer people.</p>

427

<p>A number of people on this thread seem to be clinging to the misguided notion that colleges could simply cut tuition and make up the difference by the resulting savings in money now going to FA. The math just doesn’t work. Let’s use a real world example. It’s hard to track the money flows in a major research university because there are too many moving parts. The money flow is much simpler and clearer with LACs, since they essentially do just one thing: teach undergraduates. Here’s the (only slightly simplified) actual 2012-13 budget of a handsomely endowed leading LAC that gives only need-based FA and meets full need:</p>

<p>REVENUE:
Tuition: $94 million (2,000 students @ $47,000)
Room & board fees: $22 million (2,000 students @ $11,000)
Endowment payout: $80 million (4% of $2 billion endowment)
Annual giving & grants: $24 million
TOTAL REVENUE: $220 million

  • LOSS (financial aid): $43 million (1,000 students @ average need-based award of $43,000)
    NET OPERATING REVENUE after FA: $177 million
    NET COA for 1,000 full-pays: $58,000 ($48,000 + $11,000)
    AVERAGE NET COA for 1,000 students on FA: $15,000 (full COA - $43,000 average FA award)
    AVERAGE NET COA for all students: $36,500</p>

<p>Now suppose this college followed the advice of some posters on this thread and reduced tuition by $43 million, the amount it now gives out in need-based FA. You’d get:</p>

<p>REVENUE:
Tuition: $51 million (2,000 students @ $25,500, a reduction of $43 million)
Room & board fees: $22 million (unchanged, 2,000 students @ $11,000)
Endowment payout: $80 million (unchanged)
Annual giving & grants: $24 million (unchanged)
TOTAL REVENUE: $177 million (reduction of $43 million)

  • LOSS (financial aid): 0
    NET OPERATING REVENUE after FA: $177 million (unchanged)</p>

<p>So far, so good. But here’s the rest of the revised equation:
NET COA for 1,000 full-pays: $36,500, a savings of $21,500 per student
NET COA for 1,000 students previously on FA: $36,500, an average increase of $21,500 per student
AVERAGE NET COA for all students: $36,500</p>

<p>Great deal for the full-pays, who are getting a steep 37% discount off the old COA. Not so great for the students previously on FA, who are facing a stiff increase in average net COA of 243%. Clearly, since the college previously calculated that on average these students were able to pay only $15,000, most will simply find $36,500 unaffordable. Of course, the college could decide to continue to meet full need, but then its “revised revised” budget looks like this:</p>

<p>REVENUE:
Tuition: $51 million (2,000 students @ $26,500)
Room & board fees: $22 million (unchanged)
Endowment payout: $80 million (unchanged)
Annual giving & grants: $24 million (unchanged)
TOTAL REVENUE: $177 million

  • LOSS in FA: $21,500,000 (1,000 students at average award of $21,500)
    NET OPERATING REVENUE after FA: $155.5 million
    NET REDUCTION IN OPERATING REVENUE: $21.5 million, a 12% reduction.</p>

<p>No college is going to shoot itself in the foot this way.</p>

428

<p>@GMTplus7‌ Today at 12:10 pm edited 12:11PM

</p>

<p>Isn’t that just a backhanded way of saying, the school has so little name-recognition that it has to pay students to attend it?</p>

429

<p>*
Isn’t that just a backhanded way of saying, the school has so little name-recognition that it has to pay students to attend it?
*</p>

<p>Basically, that can be said for any school that offers merit aid that is not connected to need.
Merit aid attracts top students who may go elsewhere without it.</p>

430

<p>

</p>

<p>Sure, and I think these elite schools were essentially like this before the second half of the twentieth century.</p>

<p>But if they do get rid of FA and lower the sticker price, as bclintonk shows, it will be unaffordable for most people. Now, it is said that many of these elite colleges could actually fill its class with full pays, but then the student body would be more skewed towards those from families in the upper income range. These institutions don’t want to do this.</p>

<p>With their policies, it looks like you start getting to be full pay if your income is about 200,000. That is about the 95 percentile nationally. And even with this, if we take Yale as our example, over 53% of the student body is from families making over 200K.</p>

431

<p>

</p>

<p>What was your school’s per capita endowment?</p>

432

<p>A billion and only 1800 students. That’s more than a half million each. Not the literal highest of any university (Harvard’s is nearly 3x that per capita) but still a tremendous amount.</p>

433

<p>

</p>

<p>This is wonky to me… So in situation A and in situation B, where both have the same total tax revenue and total number of filers, but in A the difference between the mean and the median tax for a filer is smaller than in B, more money is allocated to schools in B than in A? This is so bizarre. </p>

434

<p>“The fallacy is as follows: I’ve never heard of x; therefore x cannot be worthwhile. If these schools weren’t worth it and everyone agreed as such, then they wouldn’t be turning away 80-90% of their applicants.”</p>

<p>This is precisely the argument that gets used when you have students who say that the folks in the old country have heard of Harvard, Yale, Stanford, MIT and Berkeley, but not Duke or Brown, so therefore Duke or Brown can’t be any good. It’s not sophisticated thinking; quality is not dependent on widespread knowledge. </p>

<p>It would rather be like looking for a good watch and deciding that because you’ve never heard of Patek Philippe, they can’t possibly make a watch as good as Rolex, which you’ve heard of as a nice watch since the beginning of time.</p>

<p>It all depends on who you care about impressing. The unwashed masses or the cognoscenti? I vote cognoscenti every time.</p>

435

<p>BC – </p>

<p>You are correct that the math doesn’t work for a fancy school that does (i) zero merit aid and (ii) meets the full need of all students. But that’s an EXTREMELY small subset of the colleges out there. Like the Ivies and a small handful of other highly selective schools.</p>

<p>For the other 95% of colleges, the math does work. Instead of doing the high price/high discount (i.e. merit aid) gig, you cut your sticker price and eliminate all merit aid. You ratably adjust how much need aid you do to keep it in line with prior practice (which typically is much less than full need). You get the same bottom line as before. </p>

<p>While the math works, the colleges believe (probably correctly) that it wouldn’t work as a business proposition. All customers (i.e parents) like to buy on sale. All customers (i.e. kids) like to feel wanted and special. Kids and parents are more interested in schools with high stats/high prestige/high selectivity/high sticker price. Those all go together. Everyone wants to be a member of the high/high/high/high club, but most can only do so if they don’t have to pay full sticker price.</p>

<p>If you could get all schools to get rid of the high price/high discount model at the same time, it would work and likely have an overall beneficial affect on the price of college. But there’s no way you could keep a Miami or Case Western or USC from throwing some discounts around to get better students. Which is why the model persists. Its a market after all. </p>

436

<p>@Vlad,

There’s no wonkiness; thers’s just cold simple facts here. There’s no situation A vs. situation B; there’s only one IRS. </p>

<p>In earned income, the 39.6% bracket filer pays more federal income taxes to the IRS than the 15% bracket filer, both taxrate-wise (relative terms) and dollar-wise (absolute terms). I know you’re probably going to start arguing FICA & Medicare. So if you want to throw those in, too, since the gov’t puts all the money in the same pool anyway, the 39.6% filer is still paying more federal taxes than the 15% filer, in terms of taxrate and in terms of dollars. </p>

<p>Now for the Warren Buffet types who have predominantly passive income rather than earned income, they might be paying a lower effective taxrate. But Warren Buffet probably spends more money to water his lawn than what elite college tuition costs. FYI, what the wealthy pay to water their lawns:
<a href=“http://www.politico.com/magazine/story/2014/08/california-drought-lifestyles-of-the-rich-and-parched-110305.html#.U__GF1cls2I”>http://www.politico.com/magazine/story/2014/08/california-drought-lifestyles-of-the-rich-and-parched-110305.html#.U__GF1cls2I&lt;/a&gt;&lt;/p&gt;

437

<p>BC – P.S. In light of the declining state support of state Us, the same argument can be made with respect to in/out-of-state tuition. Which is another variation of the selective pricing model. If the state isn’t going to pony up big dollars to the state U, then the state U could/should just charge one lower price to all students regardless of residency. With some states supplying only single digit percentages to many university budgets, the argument is sound economically. But DOA politically. Even though the state taxpayers aren’t really providing as much funding as before, they still want the in-state discount. </p>

438

<p>Our daughter attended a school that met full need/ no merit aid, for approx same price that COA would have been at instate public.
Still our EFC was roughly 1/4 of before tax income.
My impression has been that families who want their children to attend a school that meets full need,( with zero merit) are shocked and appalled that their EFC is roughly 1/3 to 1/4 of before tax income.
If a family that makes less than $60,000 can pay 1/4, ( it generally is more like 1/3 for families making six figures), why is that unreasonable for a wealthier family to do the same?</p>

439

<p>Yes, northwesty, that’s exactly it. All colleges would have to stop doing it, and stop using merit aid to lure high achieving students.</p>

<p><a href=“http://www.washingtonpost.com/local/education/college-merit-aid-produces-bidding-wars/2011/05/17/AG7JwzEH_story.html”>http://www.washingtonpost.com/local/education/college-merit-aid-produces-bidding-wars/2011/05/17/AG7JwzEH_story.html&lt;/a&gt;&lt;/p&gt;

440

<p>@circuitrider,

Yes, like those sad schools no one has heard of like: Duke, Chicago, Vandy, Michigan, USC, Harvey Mudd, Michigan, Rice, Emory…</p>