Monday, October 30, 2006

Financial Aid and Race: Overuse of the "R" Word

By Richard Vedder

Tom Mortenson's Postsecondary Education Opportunity outfit does the higher education community a service by publishing great and detailed data. We at CCAP subscribe and enjoy their newsletter and colorful posters.

Having said this, I am saddened by the unjust inflammatory rhetoric in the October 2006 newsletter: "The ugly racism evident in the current financial aid system of the United States cannot be denied....The current system is racist." Startled by this comment, I carefully looked at their data. In 2004, for full-year students with one institutional affiliation who are dependents, the average grant made to whites was $3,375, while the average grant to blacks was $5,321, nearly 58 percent more. Total financial aid for whites was $7,259, compared with the 42 percent higher figure of $10,325 for blacks.

You might logically say that whites have higher incomes than blacks, so if aid is need-based, more should go to blacks. I agree. However, if one confines the analysis to only low income students (in the bottom one-fourth of the income distribution), we see the average black student still receives almost $2,000 (21-22 percent) more aid than the average white. Controlling for income, blacks are significantly favored relative to whites --perhaps reverse racism, if you will.

To be sure, because blacks on average are significantly poorer than whites (for reasons far divorced from student financial aid considerations), the parental contribution to their children's higher education is greater in percentage terms, although a good deal smaller in absolute dollars. While whites on average use financial assistance to partly reduce family financial contributions from the maximum bearable, blacks need every penny to pay the bills (and a bit more beside). Is this racism in financial aid? I think not. If anything, the data suggest that there is a sizable preferential treatment towards blacks after controlling for income. Calling our financial aid system "racist" is an unjustified slur, the worst form of race-based rhetoric. One can argue that "we should do more to meet the financial needs of minorities," but to imply that the nation is biased against minorities in college financial aid decisions is unfair and simply incorrect. It is purple prose that implies people running these programs are prejudiced and insensitive, and does nothing to resolve issues of access. Blacks have a harder time paying their college bills because they are poor, which is not the fault of the college financial aid system.

If one wanted to build a case of discriminatory treatment based on race, it is interesting to compare blacks and Hispanics. Average parental income is similar for the two groups (Hispanic income is less than four percent higher), but blacks receive on average more than 28 percent larger average grants. Although it is politically incorrect to say, I suspect colleges, wanting to demonstrate their purity and fairness in race matters, go out of their way to favor blacks over Hispanics. (Blacks historically have been politically more powerful and assertive in matters of affirmative action). Hispanics are relatively neglected -- total financial aid per student for poor Hispanics is less than for poor whites (perhaps the best evidence there is for conventionally defined racism).

It is interesting, also, that Hispanics and particularly Asians are reluctant to borrow. Asians on average attend the most costly schools (more so even that whites), but receive only about the same total financial aid as whites who average higher incomes. However, for every one dollar in grants, blacks on average borrow an additional 69 cents, whites an additional 78 cents, but Asians borrow less than 45 cents. Asians attend expensive schools and are reluctant to borrow, so their "unmet financial aid" is perhaps less of a critical access problem than for other groups.

If I had my way, it would be illegal to collect race data on students-- period. And I am saddened that chooses to play the race card in its campaign to increase access and affordability.


100Student said...


I recently published an article on the dangers and benefits of student loans and other forms of college financial aid – here is a quote from it, in case you are interested:
Student loans repayment can be a real nightmare without adopting some strategies that would help the new graduates to organize their social and financial life. Here are some strategies they can use to do this:
- An additional part-time job;
- Freelancing is another option (meaning that they can do particular pieces of work for different organisations, without working all the time for a single organisation);
- They should try to keep their living expenses as low as possible (live in a smaller apartment, live with a roommate to share some of the expenses, find an apartment that is closer to the job, to eliminate the extra-expenses for transport etc.);
- To apply for forbearance (this is an immediate solution for hard times when the new graduate is in impossibility to re-pay the amount of money and the need for student loan consolidation becomes apparent; it is a temporary period, when the graduate can postpone or delay his or her re-payments until a later time on a federal or direct loan after the beginning of the re-payment, and when the student doesn’t qualify for deferral). The forbearance must be applied through the lenders of the loans.
- To consolidate the payments.
If you feel this help, please drop by my website for additional information, such as federal student loans information or additional resources on private student loans .



Poly Muthumbi said...
This comment has been removed by the author.
Poly Muthumbi said...

Race and blacks...mmm may be poorer needs this, and thats why aids are available. If you are able why borrow. Try to rate FEDERAL STUDENT AID and you will agree with me that many students go for many concrete reasons.We all agree that there are so many loan opportunities offered by many institutions and many students are actually going for them. But let's get it straight that although many institutions give out loans, most of them will require you to pay at very high interest rates leading to a lot of pressure when it comes to paying them back. But with all these offers, sometimes its hard to land into a decision on the loan you should consider going for. Federal should stick!

amielee62888 said...

Heres a fun shocker: I'm 100% white and have never gotten approved for any federal money at my two year college. I recently got accepted into an amazing school that runs about $38,000/year. Government money now? A pathetic $5,500. Best part? I'm paying every single penny myself, no wonderful white mom and dad checks. They make enough to be in the second highest bracket so the government thinks they dish it out to me. Wrong. I had to settle for a disheartening 4-year college with a less-than-perfect nursing program that would approve me for large enough loans without a co-signer. I cried more than most because school is my passion and due to the way I look on paper, I'm assumed to receive parental help. My point here is really just focusing off your one accusation that whites apply for help to lessen family burden but blacks need every penny they get. You're wrong.