By Richard Vedder
Our nation's leading universities are feeling a bit guilty about the pronounced decline in the proportion of lower income students in their midst, and worried about rising anger over the growing reality that these schools are becoming taxpayer-subsidized country clubs with some academics thrown in. Across the land, schools are deciding to drop tuition for students from families with relatively low incomes. Today President James Wagner of Emory announced the latest of these initiatives (I am indebted to Andrea Jones of the Atlanta Journal-Constitution for bringing this to my attention).
The Emory plan guarantees that students from families with less than $50,000 a year in income will graduate with no student loans, and those from families with incomes of between $50,000 and $100,000 a year will graduate with no more than $15,000 in loans. The Emory program is somewhat different in that it limits financial liability for a wide range of middle income students, and it ties its programs explicitly to student loan debt, not to tuition levels.
This is a good news, bad news story. The good news is that a major private university is making a real effort to improve affordability and access to persons, and trying to reduce somewhat the "rich kid’s school" image of the place. It is showing some appreciation for the recently neglected role of higher education as an engine of social mobility and equal economic and educational opportunity.
The bad news is that the program has some technical defects that could prove embarrassing, and masks a more fundamental problem. Speaking first to technical issues, as I read the press release, a family whose income is $50,500 a year and sends a kid to Emory can expect that kid to incur $15,000 in debt, while the family with a $49,500 percent income will have a student who will go debt free. The earning of an extra $1,000 in income (say over 4 years) will lead to a tax on that income of several hundred percent -- making it worse off than before. There are tremendous negative incentives to work hard and more to pay for college -- or do other productive things to help the economy. A similar problem exists for students whose incomes are just over $100,000 -- they are royally hurt relative to those with just a wee bit less income.
If this program is ultimately financed by bigger increases in sticker tuition fees (paid by those with high incomes), all that has been accomplished is a redistribution of income from one class of students to another, with the university attempting to set social policy (regarding income distribution) through its complex discriminatory pricing scheme. Putting that aside, the big problem is that the Emory program, like many other ones previously announced, deal with the symptoms, not the disease. They provide a temporary patch for lower income kids, but do nothing to change the fundamental problem (the disease, if you will), namely the huge increase in the cost of higher education in modern times, and the unwillingness to make the necessary structural changes to alter this. As long as per student college costs rise substantially in real terms, someone, maybe not students themselves, will be burdened by covering the bills. That problem still needs to be addressed.