By Richard Vedder
There are two justifications usually cited for third party (government and private donor) support of higher education: it is a public good with positive externalities or spillover effects, and it is a means of promoting the American egalitarian ideal --"all men are created equal." CCAP has devoted a good deal of resources to examining the first proposition, and our tentative conclusion, at least on strictly economic criteria, is that the positive spillover effects of colleges are more theoretical than real, and that on economic grounds the case for public support for higher education is weak --maybe nonexistent or even negative (the colleges should be taxed rather than subsidized).
However, I have always said, "you can possibly justify public support for higher education on equal opportunity grounds --as a means of giving everyone a chance to succeed, regardless of their income." A dynamite new Education Trust study released this morning and authored by Danette Gerald and Kati Haycock (hereafter, G and H), Engines of Inequality: Diminishing Equity in the Nation's Premier Public Universities, suggests that even the equal opportunity rationale for public support of higher education may be dubious.
In table after table, G and H document that few of the students attending the flagship public universities of our nation are poor kids and minorities, while far more come from the higher socioeconomic strata. For example, while over one-third of Michigan college students had Pell Grants in 2004, only 13.5 percent of those attending the prestigious University of Michigan at Ann Arbor did. While nearly 49 percent of the graduates of Texas high schools in 2004 were underrepresented minorities, they made up less than 22 percent of the freshman at the University of Texas at Austin. Moreover, the progress with respect to these variables has been modest to negative over the past decade in most states.
Yet this, in a sense, is old news to followers of higher education trends. What is particularly startling are the data that G and H bring to bear on how institutions use their own financial aid resources -- not government funds. In 1995, for every dollar in grant aid given to students from families with more than $100,000 income, there were $3.87 in grants to kids from families with less than $20,000 income. In 2003, for every dollar given the rich kids (over 100K family income), the poor kids (under 20K income) got a paltry 66 cents. In absolute dollars aid to the rich rose 406 percent, while it fell 13 percent for the poor. Universities love to blame the K-12 system or inadequate state funding for the dearth of disadvantaged students in their midst. As Kati Haycock (one of my favorite fellow members of the Spellings Commission)said last weekend, at a Hechinger Institute workshop for journalists in Phoenix, while there is some truth to these assertions, the universities own behavior is simply reprehensible.
Why do they do this? Almost certainly, I think, to maximize contributions and prestige, measured by the US News & World Report rankings. Kids from affluent families are more likely to use family connections to get better jobs and make bigger alumni gifts in the long run; even now, the schools might be able to hit up their parents for dollars, and use some of their political connections as well. The US News ratings give higher marks for denying students access and for looking at entering SAT scores rather than what kids are really learning while in school.
How do we change the system? Simple: deny favored tax status and government subsidies, to universities that use institutional funds primarily to assist the upper middle class and wealthy. I hate government interference in university life, and, indeed, would prefer a world where government ignored higher education (including its funding). But if universities are going to prostitute themselves by begging for outside funds, then at the very least those funds should be used in line with broader national goals. The G and H study adds to the indignation raised by Dan Golden's great book about the private universities, The Price of Admission. College are becoming more than ever enclaves for the rich -- why should we subsidize them? We don't subsidize country or yacht clubs?