Our Two-Class System

The recession has been a double whammy for universities and parents, leaving colleges more dependent on tuition revenue while making it harder for families to pay the tab. Parents have lost their jobs, plummeting stock prices have decimated their college savings, and the home-equity loans that families used to rely on to finance their children's education have dried up. All of these forces have widened the gap between the haves and have-nots, and universities' own survival tactics have exacerbated the problem.

One notable factor is the rankings race, which distorts student-aid policies and advantages already advantaged students. In the 2010 U.S. News & World Report college rankings, Harvard tied for the top spot with its perennial rival Princeton. Its generous financial-aid packages, according to the magazine, "bolstered [its] sterling academic reputation." Since 1983, this otherwise little-read magazine has increasingly become the de facto arbiter of excellence in higher education. In the ferocious competition for status, the losers are poor students, and the recession has only made matters worse.

Rather than relying on the old norm of financial need in awarding aid, colleges eyeing the rankings increasingly award "merit" scholarships, which are based on grades and SAT scores. A new breed of "enrollment managers" base the size of financial-aid packages on the minimum amount that's needed to win over the waverers. Using sophisticated econometric tools, universities can construct an algorithm that maximizes the grades and test scores of entering students, thus looking good to U.S. News, while minimizing the amount of financial aid required to enroll them. Though the practice can be defended as generating revenue used to improve the college's academic program, the effect is to favor middle-class and less needy applicants. State-funded programs like Georgia's widely emulated HOPE scholarships, for students who do well in high school, have disproportionately benefited middle-class families. Add the preferences given to "legacies" and the scions of prospective donors and celebrities, and the penalty for being poor gets bigger.

A handful of universities such as Harvard have a big enough endowment -- in Harvard's case, the current endowment is bigger than the gross domestic product of Jamaica -- to largely underwrite their operating expenses. Because the typical private college has an endowment of less than 1.5 percent of Harvard's, tuition is the main revenue source. Steady tuition increases have made private colleges an ever-greater stretch for middle-class families and put them out of reach for many poor families. As Terry Hartle, the senior vice president of the American Council of Education, says, "Smart poor kids go to college at the same rate as stupid rich kids."

The waste, whether comprehended as stunted futures or human capital, is palpable. Each year about 10,000 high achievers from poor families, students with at least a B-plus average and an Advanced Placement score of four or five in one or more subjects, don't apply to any selective college. Just 29 percent of children from the poorest 25 percent of families who score in the top quartile of eighth-grade math earn a bachelor's degree; for the wealthiest 25 percent of students, the completion rate is more than double.

At private colleges the average student pays about a third less than the sticker price, and some even get a free ride, with the difference subsidized by those who can afford to pay full freight. But even as the recession has made colleges more dependent on tuition revenue, applicants and enrolled students whose families have hit the economic skids are asking for more aid. Washington & Lee University processed about 50 aid appeals this year, more than three times the usual number. New York University, whose tuition is among the nation's highest, began to counsel newly admitted students about whether the school was the right financial fit for them. Poor students don't need such counseling. According to the College Board, 29 percent of students whose families earn less than $40,000 a year said their 2009 college plans had changed because of the recession, compared with 16 percent from middle-class homes. Sticker shock kept many of them from applying to high-tuition schools despite the possibility of financial aid.

In short, the recession is widening the inequality gap among private institutions, and widening the access gap as well. The rich do get richer -- in 2009 almost all the top-ranked universities had more applicants than ever before. Meanwhile, admissions officers at second-tier schools suffered through sleepless nights. Fearful that students would migrate to cheaper public institutions, they were forced to cut tuition and dipped deeper into the applicant pool. Davis & Elkins, a private college, slashed its tuition by $15,000 for high-performing students from neighboring counties to match the University of West Virginia's tuition costs. The University of the Pacific had to admit twice as many students to secure the same size class as the year before. At Hofstra University, which had entertained hopes of moving up the rankings, the number of acceptances dropped precipitously. Worse off still are the 105 historically black colleges and universities, which enroll great numbers of low-income minority students.

Given the competition to survive, the practice of gaming the rankings is only worsening. A higher U.S. News ranking attracts better faculty and abler students as well as bigger alumni contributions, all of which make it easier to move still further up the ladder. That's why schools rely on ethically dubious maneuvers to game the system -- not reporting the typically low SAT scores for international students or athletes, since SAT scores count heavily in the rankings; undercounting alumni, to make the rate of giving look more impressive; encouraging "no hope" applicants to apply and denying admission to top applicants whom they deem unlikely to enroll -- in order to improve the appearance of selectivity. This year, in U.S. News' confidential survey of university presidents, University of Florida President Bernie Machen was caught rating his institution (No. 47 in U.S. News) as equal to the Ivies, thus boosting its reputational score. Baylor University in Texas offered bonuses to newly admitted students who retook the SATs, on the theory that their test scores, and consequently the university's No. 80 ranking, would improve.

Admitting sizeable numbers of students via early decision improves an institution's "yield," another factor that the college rankings incorporate, and economists have calculated that applying early gives candidates the equivalent of a boost of 100 SAT points. But because poor students can't afford the take-it-or-leave-it financial-aid award that comes with early admission, the practice also favors the well-to-do.

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Among the U.S. News top 20, not a single one is a public university. That reflects the most significant recession-fueled crisis in higher education -- the speed-up of disinvestment in state universities. Federal stimulus dollars covered some of the state budget cuts, and administrators are bracing for even worse news next year.

Between 1980 and 2000, the share of universities' operating expenses paid for by state tax dollars fell by 30 percent, and the share of state revenue given to higher education dropped by one-third, from 9.8 percent to 6.9 percent (see Michael Hout, page A8). The most visible casualties of the recession have been public universities with aspirations to become, as Arizona State University boasted, the "New American University." There, the plan envisioned enrolling 100,000 students by 2020, breaking down disciplinary boundaries, creating a world-class research enterprise, and expanding access to poor students.

To boost its profile, the university has treated National Merit Scholars like football stars, offering them four-year $90,000 scholarships at a school with a tuition of $6,000 per year and enrolled more of them than did Yale or Stanford. But with Arizona hit especially hard by the economic downturn, the emphasis now is on boosting the number of out-of-state students (who pay triple the in-state tuition) to 40 percent, not providing more opportunities for poor students. The New York Times reported last March that 48 programs had been closed, enrollment capped, and faculty and staff furloughed. "The New American University has died; welcome to the Neutered American University," wrote the editors of ASU's student paper, the State Press.

Similar doses of pain have been inflicted on flagship universities in Florida, Tennessee, Nevada, and Vermont, as well as 100 miles away at the University of Arizona. "The further you go down the hierarchy of prestige, the worse the effects," writes Columbia University scholar Andrew Delbanco in The New York Review of Books. At teaching-oriented state schools the already-crushing teaching load has increased, fewer courses are offered, and classes are more crowded. Under those circumstances, getting a degree in four years has become almost impossible.

Some state universities have emulated private schools by raising tuition and admitting more out-of-state students. But the recession has cut into the out-of-state market, with students opting to attend cheaper schools in their home states. The universities of Michigan and Virginia have discussed severing their ties with the state and going private, relying on their endowment income and charging in-state students the market rate. That strategy burdens poor students, already scarce on the ground in Ann Arbor and Charlottesville. And it won't work for most public universities, which can't make up the loss of state support with tuition or endowment income.

"The extraordinary compact between state governments and their flagship universities" has been consigned to the junkyard of history, observes Mark Yudof. As the president of the University of California who earlier ran the university systems in Texas and Minnesota, he has as clear-eyed a perspective on higher education as anyone. Fifty years ago, the Golden State linked two world class universities, Berkeley and UCLA, with a scattering of teachers' colleges and agricultural schools, building a system of public higher education that has been a world model ever since. The state's Master Plan guarantees community college for every high school graduate; solid undergraduate teaching for the top 33 percent; and, for the brightest young Californians, an education at internationally renowned universities, including seven of the top 50 research institutions in the widely cited Jiao Tong Shanghai University 2008 world rankings. These universities have also been at the forefront of expanding access to low-income students -- there are more recipients of federal Pell grants (awarded to students whose families earn less than $45,000 a year) at Berkeley than at the Ivy League campuses combined.

That's one reason why Berkeley ranks first in Washington Monthly's 2009 university rankings, which emphasize social mobility, research, and service, and six of the UC campuses rank in the top 25. Harvard and Princeton, tied for top billing in the U.S. News horse race, weigh in at No. 11 and No. 28 respectively. As the editors note, "UC campuses enroll unusually large numbers of low-income students while maintaining high graduation rates, generating billions of dollars in research funding, and sending a healthy number of students into service programs like the Peace Corps."

Now this much-lauded system is on the verge of imploding, a casualty of shifting public priorities. In the past 30 years, as California's population grew by more than 50 percent, the state has built just one new university campus but 22 prisons. Since 1990, state support for each UC student has been reduced by 40 percent. The 2008?2009 budget was cut by $813 million, with bigger losses anticipated next year. Consequently, community colleges and universities have had to limit enrollment, turning away thousands of students for lack of space and marking an end to the promise of universal access. The City College of San Francisco found itself peddling naming rights to courses, at $6,000 apiece, to keep them from being eliminated. Across the University of California system, professors are being lured away by offers from universities that smell blood in the water.

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To borrow from ben franklin's book of aphorisms, public and private universities need to hang together or they'll hang separately. With states unable or unwilling to support higher education, universities will require an infusion of federal dollars. What's called for is a grand bargain -- more money from Washington, linked to a commitment to promote greater accountability. One must be careful about such bargains, of course; the wrong kind can end up looking like No Child Left Behind. However, these institutions could strengthen their case for additional public support by calling for a cease-fire for the worst aspects of the status wars. Even as Silicon Valley firms support "pre-competitive" research that all of them can use, universities could do something similar -- not using lighter teaching loads as an inducement for professors, for instance, maintaining need as the primary basis for awarding scholarships, and opting out of the U.S. News gaming.

The ultimate question is this: Can the public be persuaded that universities represent something as ineffable as the common good -- that higher education contributes to the development of knowledgeable and responsible citizens, encourages social cohesion, promotes and spreads knowledge, increases social mobility, and stimulates the economy? Can the argument convincingly be made that universities offer something of such great value that they are worth subsidizing, even in the teeth of bottom-line pressures?

A few years back, the Economist gushed that the United States "has almost a monopoly on the world's best universities ... [and] also provides access ... for the bulk of those who deserve it." Are we serious about getting back into the brains business?

The author has been "furloughed" to the tune of an 8 percent salary cut.

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