Why Not Eliminate Tuition?

In a recent article that received a fair bit of buzz, The New York Times spun a story of the supposed new reality in the recession-plagued U.S.—Students from more well-off families being given admissions preference at increasingly cash-strapped universities. But the Times article misses the larger point. Lawrence University, Colby College and Brandeis (some of the institutions mentioned) are all fine schools that provide good educations, but they are not entry points into the elite post-graduation professional networks in the same way that top Ivy League schools (and a few others of similar prestige) are. For those schools, the real story is the same as it has been—in a time of increasing economic stress, “need blind” admissions will continue for those fortunate enough to be on financial aid—but the uncontrolled escalations of costs for everyone else will continue, putting an increasing financial burden on these students and their families.
When my father entered Harvard University in 1958, fresh from public high school in Ohio, it had just raised it’s tuition a staggering 25% from the previous year. . . to $1250. While inflation would make that figure equivalent to about $9,000 now, the fact remains that this less than one-fourth of the cost of Harvard’s tuition and fees today.
Through a combination of scholarships, parental savings and a summer job each summer at Republic Steel, my father’s family was able to easily afford an supposedly elitist Harvard. Had my father been applying to Harvard today under similar financial circumstances, his parents likely could not have afforded to send him.


Harvard back then was seen as a bastion of elitism, all male, almost all white, and filled with wealthy students from America’s elite prep schools. But while Harvard has shed many of its elitist trappings for a carefully studied new more “egalitarian” image, the reality is that for many upper-middle class students (a group that my father would have fallen into) it was much easier to afford the Harvard of fifty years ago than it is to afford Harvard today. And for those students whose families make enough money to afford it, Harvard and other ivies have made a policy choice to use their tuition as a form of income redistribution—spreading the wealth around. Call it the Obamaization of Ivy League tuition.
For example, according to Harvard’s current financial aid rules, a student whose family makes $120,000 a year should have to pay approximately $12,000, or 10% of family income. —But while $120,000 may be a lot in a state like Mississippi (which sends few students to Harvard), it is not so wealthy in the expensive states and counties from which Harvard draws most of its students. And if you have greater than a “normal” level of assets given its level of income (for example, if you have been an exceptionally good saver or investor, or perhaps if traded in your old more lucrative career several years back for lower paid work that you found more meaningful) then you can expect to pay a much higher tuition even if you now make less money . But, if you made money and were profligate, or better yet, overspent your family into a recent bankruptcy, you’re in luck. Harvard will be willing to give you a personal bailout even if you have a job paying $200,000 per year. Harvard’s asset awareness criteria replicate the policies were are seeing from Washington: the prudent bail out the profligate.
Even for those families with normal levels of assets, these tuition policies prove challenging For example, in Santa Clara county where I live (population 1.7 Million) the median income for families with children is well into six figures, and typical mortgages for modest homes are often $5,000 or more per month. For families living in Santa Clara and other similar counties, even Harvard’s reduced tuition constitutes an enormous burden. This might seem strange given the tremendous publicity that Harvard, Yale, Stanford and similar schools recently received for dramatically boosting their financial aid even to the upper-middle class—while eliminating family contributions altogether for those making mid five-figure salaries. And in truth, the increases have been quite helpful in increasing affordability for many students. But because such boosts have come in the form of financial aid increases, rather than tuition reductions, it has merely served to increase the amount of money such universities are extracting from their “paying customers” on a yearly basis. But the well and moderately well-off are not the only victims the Ivy League’s high retail rate. Many students and their families, put off by the high sticker price of an Ivy league education, will ignore the “good news” about financial aid and decline to apply.
Ivy League schools often cite the alleged “high cost” of educating students as justification for their continual tuition increases. But this reasoning is utterly specious. The vast majority of students even at elite universities do not require large budgets to educate—as anyone who has sat in a several hundred person lecture at Harvard and Yale is well aware. It is only a rapidly expanding academic bureaucracy, out-of-control facilities budgets and sweetheart labor deals that have raised the cost of education through the roof
Fortunately, there is an alternative to the current confiscatory shell game being played by the Ivy League and its elite sister universities., Rather than continually charging usurious rates for those students from upper-middle class and more affluent families, they could simply eliminate tuition altogether. This may seem like a radical an alternative, it is not an implausible one. Tuition makes up just 20% of Harvard’s revenues, 16% of Stanford’s revenues and 11% of Yale’s. At an undergraduate level, those numbers are even less, as far more people in professional schools are much more likely to be “paying customers”. While schools do not break out the specific numbers, it is doubtful that Undergraduate tution makes up a double digit percentage of today’s typical elite university budget. Simply bringing budgets back (in inflation adjusted terms) to what they were just a few years ago would easily pay for free tuition for every student. Even a 50% reduction in “retail” tuition would send a dramatic signal about affordability to all students while getting universities out of the income redistribution business.
There is in fact, a wonderful model for doing just that– our military academies (West Point, The Naval Academy, Air Force Academy, etc.) all of which provide their education free of charge regardless of parental income. Harvard, Princeton and their other elite counterparts make much of their “public service” missions. Putting their money where their collective mouths are would be a great way to prove it.
If elite Universities were truly interested in simply recruiting the “best and the brightest” rather than a self-reinforcing community of left-leaning students from affluent families willing to pay confiscatory sums to trumpet Harvard as a status symbol, then a fundamental reform needs to take place. The service academy model should hold a great deal of appeal for elite universities that allegedly inculcate service to humanity as a core value and are filled to the brim with ambitious “do-gooders” of various stripes.
Rather than engage in a Kabuki theater about bringing in “the best and the brightest” regardless of their ability to pay, eliminating or dramatically reducing tuition would demonstrate it. Applications would soar alumni loyalty (and presumably future donations) would increase. Every student anywhere in America could know that if they studied hard enough, they could obtain an education at one of the world’s top universities.
In sum, The New York Times has it all backwards. The relevant news is not that in an economic downturn some good, but non-elite schools are now taking more wealthy students. The real news is that the Ivy league, even at a time of increased financial difficulty, is continuing to raise the burden on the families of every student they determine to be economically unworthy of their largesse, all done in the service of wealth spreading that seems to be so much in fashion.

Jeremy Carl

Jeremy Carl is a research fellow at the Hoover Institution.

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