By Jon Marcus, The Hechinger Report
A sophomore at UC Berkeley, June Ahn comes from a family whose income is just enough to put her past the reach of much financial aid. So, like many students, Ahn is using loans to underwrite her education.
To make matters worse, she comes from Washington, not California, so she pays two and a half times as much as in-state tuition. And she pays it even though, as an underclassman, she’s still taking large-enrollment classes that cost the university much less to provide than smaller, upperclass courses and seminars.
It gives Ahn little consolation to know that some of her money is likely being used to subsidize the educations of her lower-income, in-state and junior and senior classmates.
“I’m not in a better financial position than any of the students I would be helping to subsidize,” said Ahn, whose anticipated major — political science — also is cheaper for the university to provide than majors for science and engineering students who, at UC Berkeley, are charged the same as she is. “But I have an extra almost $10,000 that I still need to pay.”
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As a new academic year begins, growing scrutiny of record tuition and fees is drawing new attention to the longstanding cycle of subsidies like these on which American colleges and universities depend — but which they would rather not discuss.
Rich kids subsidize poor kids. Out-of-state students subsidize in-state ones. Humanities majors subsidize science majors. Freshmen and sophomores subsidize juniors and seniors. Undergraduates subsidize graduate students. And international students subsidize everyone.
Now activists and legislators are pushing back against the Robin Hood-style use of some students’ tuition revenues to pay for other students’ financial aid. They’re pressing for different prices for different subjects based on the actual cost of instruction, and, in some states, even proposing an end to a perk under which taxpayers subsidize tuition for faculty children.
Still, many families and students seem as much in the dark about these practices as airline passengers who pay different fares for similar seats on the same flight to the same place.
“If you combine general financial illiteracy with the opaque nature of college financing, it’s surprising that anybody really knows what’s going on,” said Andrew Gillen, senior researcher at the American Council of Trustees and Alumni.
For universities, there’s an advantage in this, Gillen said: “If somebody doesn’t know he’s paying more than the kid next to him, he doesn’t get upset.”
But if that student is paying full or nearly full tuition, higher-education experts said, it’s likely some of the money is going to lower-income classmates who aren’t.
“Schools have become more aggressive in this income-redistribution aspect of higher education,” said Richard Vedder, director of the Center for College Affordability and Productivity in Washington, D.C. “There’s an economic-theory dimension to this, which is that there’s always a small class of students who have a lot of money, and the income-maximizing enrollment manager wants to zap it to these kids.”
At least 15 states have explicit policies under which some of the revenue from students who pay tuition at public universities goes to others who can’t cover the full cost, according to the State Higher Education Executive Officers, or SHEEO. In Arizona, for example, public universities channel about a quarter of tuition revenue into discounts, grants and other forms of financial aid. In North Carolina, at least 25 percent of money generated by any increase in tuition goes to such subsidies, while in California it is one-third of each tuition increase.
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Critics say this penalizes not only full-tuition-paying, high-income parents and their students, but also middle-class families already being squeezed by escalating costs. In June, the Iowa Board of Regents ordered the practice to end in that state within five years. There, some $144 million a year in financial aid is redistributed to low-income students — as well as high-achievers who don’t qualify for federal aid — from the tuition their classmates pay. The regents called for the portion of tuition that now goes to truly needy students to be replaced by contributions from the universities’ fundraising arms.
Similar appeals have come from the governor of Virginia, Arizona legislators and members of the University of North Carolina Board of Governors.
Since universities are also offering more scholarships to students with high grade-point averages and SAT scores, which elevates them in the all-important U.S. News & World Report college rankings — and since many of those top students come from affluent families and don’t qualify for federal aid, Gillen said another trend is at work. “Rich, dumb kids,” he said, “are subsidizing rich, smart kids.”
Out-of-state students at public universities also are increasingly subsidizing in-state students. That’s because out-of-state tuition is almost always higher than in-state — two and a half times as much for out-of-state than in-state students in the University of California system, for example. At the University of Virginia, out-of-state students pay almost twice what it actually costs to educate them; the rest helps pay for educating everybody else.
Numbers like that are why public universities are aggressively recruiting out-of-state students. About a third of students at the universities of Illinois, Virginia and Washington now come from out of state, and nearly 40 percent at the University of Michigan and the University of Wisconsin-Madison. At UC Berkeley, the proportion is nearly 30 percent, about six times what it was as recently as 2006. At UCLA and UCSD, almost one in every five students is from outside California.
So much in demand are out-of-state students that they’re more likely to be accepted for admission to both UC Berkeley and UCLA than in-state residents whose parents’ taxes subsidize the universities. The California State University system recently announced that it would not accept in-state graduate students next spring; only out-of-state students, who pay more, are welcome to apply to Cal State graduate-degree programs.
International students also subsidize domestic ones. Eighty-one percent pay universities the full price, a much higher proportion than students generally, bringing in around $20 billion a year in tuition and living expenses, according to the U.S. Department of Commerce and the Institute for International Education.
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Freshmen and sophomores, meanwhile, whose introductory courses are often taught in large groups in giant lecture halls with help from low-paid teaching assistants, subsidize juniors and seniors, who pay the same tuition but cost from one and a half to two times more to educate, according to a SHEEO survey based on research conducted in Florida, Illinois, New York and Ohio. A member of the faculty at UCLA has separately calculated that the disparity is even greater: Classes averaging 200 students, he found, cost about $56 per student to teach at public universities, compared to $560 per student in classes averaging 20 students. Yet all are charged the same amount.
“The big introductory lectures with 400 students, there’s a lot of profit in that class,” said Gillen. “And that’s used to subsidize smaller seminars for the upperclass students.”
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Some of the money also goes to graduate programs that are expensive to operate.
“At the large research universities, the subsidization of graduate students is monstrously large,” Vedder said. “A student in a Ph.D. program sits in seminars of six and eight students taught by a professor making $150,000 a year and gets an extremely costly education. At the same university, the freshman who’s taking Introduction to Psychology, Introduction to Economics, sitting in lectures of 400 people — these kids are paying the same tuition.”
Undergraduates in low-cost disciplines such as the humanities and social sciences also help to pay for students in subjects that cost more to teach, including fine arts, agriculture, law and engineering, the Delta Cost Project on Postsecondary Education reports, since they, too, all pay identical tuition.
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A few universities are starting to charge different prices for different fields. At least 143 public universities now levy so-called differential tuition that varies by major and, in some cases, by year of enrollment, the Cornell Higher Education Research Institute found. The University of Maine, for instance, adds a $75 fee for engineering courses, and the University of Kentucky charges an extra $460 per semester for nursing students.
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