Squeezed Out
Middle-class students can’t afford private colleges.
By Tim Fernholz, Georgetown University
Wednesday April 25, 2007
College financial aid just got sexy. Well, it got exciting. With New York Attorney General Andrew Cuomo (the second coming of Spitzer?) on the war path against financial aid officials whose personal interests conflict with their responsibility to help students pay for the education they deserve, the story has hit the front pages.
While white-collar crime grabs the headlines, the underlying problem of middle- and low-income students still struggling to pay for college keeps getting worse. As higher-income students maintain, and continue to expand, their admissions advantage and higher-ed institutions react by reaching out to low-income students—often with an emphasis on first-generation college students—it’s those in the middle that feel the heat.
“The institutions are doing better, but now it is the middle two quarters that are getting pancaked in the process,” said Georgetown Senior Associate Dean Hugh Cloke, who has been involved in admissions for 35 years.
In the end, it’s not just access, but also equity and diversity that count. While getting into strong public universities can be difficult, it’s even harder for many American students to find their way to a top-tier private institution—and then pay for it. An article in The New York Review of Books by Columbia University Professor Andrew Delbanco aptly titled “Scandals of Higher Education” dissects this problem. Delbanco notes that in the latter part of the 20th century the number of students from the lowest income quartile at private universities has stayed around 10 percent, while the percentage of students from the top quartile rose from about thirty percent to fifty percent.
“In short,” he writes, “there are very few poor students at America’s top colleges, and a large and growing number of rich ones.”
Since 2001, the median cost of college educations has gone up 41 percent, to yearly average fees of $22,218 for a four-year private institution and $5,836 for a four-year public institution. Meanwhile, the median family income in the United States is about $46,000. And Harvard’s dean of admissions was quoted in the Crimson stating that “middle-income” Harvard families have a household income between $110,000 and $200,000.
These middle class misapprehensions aren’t limited to Harvard, though. I exchanged email with Monica Inzer, Dean of Admission at Hamilton College, number 17 on the U.S. News and World Report list of best liberal arts colleges in the country. Hamilton recently made a much-heralded switch from giving merit-based aid to offering only need-based aid, traditionally a sign that a school no longer has to work to create a strong class academically (all the Ivies use this system), but instead needs to attract diversity.
But it’s hard to understand what kind of income diversity they’re attracting.
“Ultimately, this policy shift will help the middle class,” Inzer wrote. “Middle class can be defined many ways, but the average income of a Hamilton family receiving financial assistance is nearly $90,000. Furthermore, half of Hamilton families on financial aid are in the top 28 percent income bracket for all U.S. households and in a recent study nearly one-third (31 percent) of Hamilton students receiving aid came from families earning more than $100,000.”
Hamilton’s yearly cost is approximately $43,890. And for determining the middle-income, well, 50 percent of U.S. households make between $22,500 and $77,500.
Given the demographic spread, the question at hand is why increasing numbers of wealthy students are going to elite private colleges. An obvious reason is simply their advantages—wealth gives students the best college preparation, at private high schools and top-tier public schools, and the ability to join extra-curriculars and prep for the SATs; wealth correlates with higher grades and test scores. Another is the advantage of legacies and fundraising connections. Walter Benn Michaels, a professor at the University of Illinois, argues that the academic left has focused on issues of diversity—race, gender, etc. —over the harder issue of economic disparity, at its peril.
The other question is what is to be done. Within the higher education community, the elimination of early admissions—which gives the wealthy an advantage because they do not need to compare financial aid offers—is part of the equation. More aggressive recruiting at schools with less affluent student bodies or even economic affirmative action are further options. And grants are better than loans, but only the schools with the largest endowments—those with the wealthiest alumni, typically—can afford that.
And then there is the government. The Democratic Congress that took office made student loan interest rate reduction part of its “Six for ’06” legislative agenda. Democratic leaders and operatives consider college payment issues an integral part of their populist program because, as one staffer told me, many people are paying off their college loans, trying to pay for their kids’ college, or doing both at the same time.
A year ago Campus Progress ran a story about the challenges faced by legislators trying to reform student loan law. It painted a bleak picture of the Republican-controlled—and loan industry-influenced—committee. But last week a couple Education Committee staffers who spoke to Campus Progress on background because of their involvement in ongoing legislative negotiations painted a much rosier picture of the situation. They noted the bipartisan majority that passed HR 5, the interest rate reduction bill the House passed earlier in the year.
What else is on the agenda? A bill to make financial aid forms easier to fill out, a bill—in response to the Cuomo investigations—to demand transparency for student loan officials, and most importantly, the Student Aid Reward Act.
The STAR Act is an incentive package designed to make more institutions choose federal direct lending over giving government subsidies to lenders. Both programs exist now, but direct lending is cheaper—to the tune of $13 billion—because it eliminates the loan company middleman. Today, private lenders manage to control almost all of the lending market share (77 percent) using various incentives, like making fees and rates competitive for some. In some cases they buy off school officials with the kinds of gifts that get state attorneys general excited—this New York Times article details some of their practices. The STAR Act promises to make direct lending come out on top—without eliminating private lending entirely—by reinvesting $10 billion in Pell and other student grants, much of it being returned to higher ed institutions for direct distribution to students. That’s a definite move in the right direction.
Cooperation between the government and higher education institutions to put in place a variety of policies friendly to middle- and low-income families can help stem the problem of inequality in higher education. But the real solution, as one of the education committee staffers said, is working to improve our public education at every stage to level the playing field. But until that happens, at a minimum, we need to make sure we don’t forget what “middle income” really is.
Tim Fernholz is a junior at Georgetown University and managing editor of The Georgetown Voice. He can be reached at tfernholz@gmail.com.
Illustration: August J. Pollak
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Comments
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It’s good to see that you’re still churning out quality articles Tim.
— Eric Kafka - Apr 26, 12:10 AM - #So now the Ted Kennedy and Direct Lending wants to offer “incentives” to schools. The same thing Kennedy and Cuomo are fighting against the private lenders.
Also doesn’t Direct Lending only have one lender? The same thing that Cuomo and Kennedy do not like about private lender schools that only have one lender on their lender list.
Of course it all makes sense now. It becomes ok, and legal if the government does the same things it accuses the private industry and schools of doing.
— Donovan - Apr 26, 08:41 PM - #Tim Fernholz, you are ubiquitous.
— Will - Apr 27, 12:20 AM - #Reform of student lending will be positive, but the real issue is the cost increase by the universities. College costs have exceeded inflation & wage increases for years now. So, I view with a jaudiced eye any school official who says they’re trying to help me. Hey, stop the large increases.
— JBeacH - Apr 27, 07:23 AM - #Don’t place 100% of the blame for cost increases on Universities alone. They have to contend with rising costs of healthcare for their employees (where is the talk of socialized medicine in this discussion?), and demands for better facilities (academic and residential). We all contribute to these cost increases. It will break at some point because many families will not be able to afford it any longer, but that tipping point hasn’t happened yet.
— FriendlyFascism - Apr 27, 12:22 PM - #This article neglects to mention the availability of money for loans and grants to students in private institutions generally exceeds public institutions. Generous alumni do much to help deserving middle and low income students.
— valiant venus - Apr 27, 12:45 PM - #Part of the problem is scholarships for non-mental activities, like football. I thought they were institutions of higher LEARNING! Moreover, one university gave $$ to a football player from a wealthy area; this year they allotted a full ride for a recording/movie star so he can play basketball! And this child’s dad is a hiphop mogul!!!! THIS is what needs to stop & there will be more $$ for the middle class.
— kathy - Apr 27, 12:47 PM - #I agree with Kathy. I go to a private ART school that gives full scholarships to students on the sports teams. Some of these same students aren’t even playing the sports they are on scholarship for!!
— Ashlie - Apr 27, 02:14 PM - #Excellent article.
As a middle-income student, I’ve noticed this divide between somewhat rich private schools and very rich private schools that you mention in your piece. It puts a student like me in a bizarre situation where I’m almost squeezed out of the somewhat rich schools because their finaicial aid, merit-based scholarships and aid for international students are restricted compared to the richest few universities. That surely leaves many students praying to a variety of deities that they’ll get into the richest schools, or they’ll be left with the next most affordable option which might be well down their list of preferred options. So for some it’s go in-state or get into an Ivy – nothing in between.
— AndrewGarib - Apr 27, 05:15 PM - #The article fails to acknowledge the problems that the lower income bracket still have while trying to attend those top tier private schools. When the schools cost in excess of $40,000/year, and the maximum Perkins/Stafford loan combination is $10,500, another loan, such as a private loan, must come into play. To get a private loan, you need a credit-worthy co-signer, and as a low income student, you often have no such person available. The middle class tend to have more of these credit-worthy co-signers available, so it’s not quite as hard to afford the high prices when they can take out a private loan for it. This is the real issue that needs to be addressed: students who have no co-signers. It doesn’t matter what income bracket such a student is from, they’re still not going to be able to afford a top tier private college without such loans.
— Sean Feeney - Apr 27, 09:01 PM - #I agree with Sean. Even at the top tier private schools, not all low-income students are getting the sweetened aid packages that they brag about. Specifically, schools in the 568 Group (check out www.568group.org) are notorious for counting the income of a noncustodial parent in need determination no matter what the family circumstances are. Kids from messy divorces whose noncustodial parents make a lot of money get screwed if that parent does not contribute. Of course, divorce is more prevalent among low-income families, and, as Sean pointed out, these families are less likely to have credit-worthy cosigners. To bring all this talk down to a personal level, I might not be able to pay for Yale next year, and my little sister, who just got into an 8-year medical education program at Brown, might not be able to afford to go to her top choice college. Our EFC from FAFSA is $0, yet two of the most highly lauded aid programs in the country let us fall through the cracks, despite a stated institutional interest in socioeconomic diversity. Wrap your head around that one. There are so many issues to be worked out about educational equity at the postsecondary level, I wish that this article did more to place the middle-class problem in a broader context.
— Paul Schneider - Apr 28, 03:32 PM - #Yup, here comes the government again saying “How can we hep ya slop at the public through?” If someone wants a college education perhaps he should WORK for it, like I did – bagging groceries, working part-time in a factory, etc. And yes, I got good grades – enough for a BA in Math, MS in Business Management and a JD. All on an income of about $15K a year in the 70s.
Wise up and run from the government – it isn’t your friend.
— Zackery Fischer - Apr 28, 09:26 PM - #Article suggests eliminating the middleman(men) is good. I agree. However, why not eliminate all middlemen from the process (i.e IRS, Congress, & Admissions-to be fair since you don’t want to block or exlude any student regardless of backround). I suggest the professor’s shed some of their insulation (isolationism) and negotiate directly with potential students based on cost and qualifications. Problem is most in academia do not have the skills, temperment, comitment, or want the personal accountabilty required to market their service to their customers (students) directly and instead rely on expensive middlemen to handle these “unpleasant” tasks.
— louisdous - Apr 30, 09:22 AM - #zak fischer, you went to schoolin the 70’s, and you neglected to say what college you went to. in the 70’s, going to college got you a job. today, all that work might pay your way through an OK instate school.
also, in the 70’s housing was cheaper. you have to take these all into the equation.
Oh and about 15K in the 70’s? isn’t that like 45K these days?
— matt steele - Apr 30, 09:52 PM - #