By Richard Vedder
A week or two ago, Harvard created a medium-sized stir when it announced that it was abandoning early decision admissions. Soon Princeton followed, and now there is much buzz about whether other selective admissions schools will follow.
I have not commented on this little brouhaha for several reasons. First of all, early admissions at most impacts 10 percent of students going to college, and probably importantly a still smaller proportion. It is an issue only at selective admissions schools. Second, whether universities admit kids in the fall or the spring of their senior year to me is of trivial importance relative to some of the real major issues contributing to high costs and low productivity.
Critics of early decision say that it is a practice that discriminates against the poor. Under early decision, kids that agree to enroll if accepted are given an early notification of their admission --before financial assistance decisions are made. This allegedly hurts lower income kids who are very dependent on financial aid. It always struck me as a little strange to have multiple admission tracks, and that it vaguely violates the idea of a "level playing field." However, as a general principle I believe that universities should be able to take whatever steps they wants to determine how and when they admit students, so my concerns over early decision have been pretty muted.
The broader issue with regards to the Harvards and Princetons of the world is: why do they charge any tuition at all? Most financial aid issues disappear if tuition is zero. Harvard's endowment is $29 billion. With a five percent rate of return, that is $1.45 billion annually in income --about $75,000 per Harvard student. According to Department of Education data, salaries of teaching faculty per student are perhaps 20-30 percent of tuition levels at better private schools. Even if faculty salaries are only one-third of instructional cost, tuition charges should more than cover the cost of instruction. Since endowment income is sometimes double what tuition income is, why do we need any tuition at all? The reason, of course, is that many universities have made undergraduates a forgotten cash cow, taught by "tutors" and "graduate assistants" while professors are paid princely salaries to teach little and do their research. If Harvard and Princeton allocated resources properly, any student from families of under $100,000 income would pay no tuition, so the alleged inequities that come with early decision would largely disappear.